The U.S. goods trade deficit hit a record $1.2 trillion in 2025. AI-related imports fueled much of that gap. Semiconductors, servers, cooling systems—America imported them in droves to power its data-center frenzy. Without this surge, the deficit would have shrunk by nearly $200 billion, according to a meticulous analysis by Federal Reserve economist Michael E. Waugh.
Waugh’s study, published by the Federal Reserve Bank of Minneapolis and the National Bureau of Economic Research, used a large language model to classify over 18,000 product codes. AI goods—everything from chips to HVAC units for data centers—made up 23% of all U.S. imports last year. That’s up from 15% in 2023. Imports in this category jumped 73% over two years. Non-AI imports? A mere 3% rise.
“Trade in AI-related products is a very important force behind U.S. trade over the past year,” Waugh wrote. “In fact, it might be even more important than dramatic changes in U.S. trade policy.” His accounting shows AI imports reached $265 billion, against $71 billion in exports. The imbalance added hundreds of billions to the red ink.
Taiwan and Mexico dominate the flows. Together, they handle about half of U.S. AI trade. Taiwan ships semiconductors. Mexico sends computing gear, wiring, and more. Strip out AI growth, and January 2026 non-AI imports sat 14% below 2023 levels, per a Fortune report drawing on Waugh’s work. President Trump’s tariffs aimed to claw back manufacturing. They hit non-AI goods with 12.1% duties on average. AI products? Just 4.5%, thanks to 69% exemptions.
Domestic production lags. Intel’s Ohio plant faces delays. TSMC’s Arizona and Japan sites struggle too. Factory jobs dipped amid immigration curbs. Private AI investment hit $286 billion last year, per Stanford’s AI Index—over $140 billion for infrastructure alone. That cash buys foreign hardware. U.S. semiconductor imports alone topped $173 billion in 2025, up from $118 billion in 2023, as noted in a Wall Street Journal piece.
And the boom shows no signs of slowing. February imports swelled 4.3% to $372.1 billion, driven by computers, accessories, and semiconductors tied to data centers, according to Reuters. Capital goods jumped $7.8 billion. Exports grew too, but not enough. The monthly deficit widened to $57.3 billion.
Power gear adds another layer. Transformers, switchgear, batteries—imports of major electrical equipment rose 4.7% year-over-year to $411 billion in 2025. China supplies over 40% of batteries and 30% of key components. Lead times stretch to five years. Half of 2026’s planned data centers risk delay or cancellation. AI firms like Alphabet, Amazon, Meta, and Microsoft plan $650 billion in spending this year. Yet supply chains remain overseas.
Tariffs clash with tech ambitions. Trump wants both a smaller deficit and AI supremacy. Exemptions keep hardware cheap. But they widen the gap. Waugh’s Minneapolis Fed president Neel Kashkari wondered why Mexico trade held firm despite duties. Answer: AI demand.
So America races ahead in models and apps. Hardware? Mostly imported. Exports lag far behind. The $1.2 trillion deficit reflects that split. Policymakers face a bind. Jack up tariffs on AI gear, and data centers stall. Ease up, and red ink flows. Waugh’s numbers lay it bare—no quick fix.
February’s data underscores the tension. Imports of computers soared $5.4 billion. Semiconductors added $1.1 billion. AI buildout overrides policy shifts. Non-AI sectors weaken under tariffs. Without exemptions, costs would spike, slowing deployment.
Global ripples emerge. Japan’s exports rose seven months straight on AI demand, blunting Mideast risks, per Reuters. South Korea draws investors on memory chips for data centers. China pushes models closing the gap—now just 2.7 points behind leaders.
U.S. talent woes compound it. AI researchers inbound plunged 89% since 2017, 80% last year alone, amid H-1B hikes to $100,000 per hire. Firms eye Zurich, London, Singapore. Billions in capex risk underuse without brains to match.
The deficit’s AI imprint grows clearer. 2025’s record stemmed from this hardware hunger. 2026 brings more. Trade data will tell. For now, exemptions preserve the rush. At what cost? Economists watch closely.
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