Japan booked a ¥117.5 billion ($795 million) trade deficit in July, confounding economists who had expected a surplus of almost ¥200 billion, the Finance Ministry said on Wednesday. The shortfall ended a two-month run of surpluses and underlined the hit to the export-led economy from higher U.S. tariffs and soft global demand. Total exports fell 2.6% from a year earlier—the steepest decline since February 2021—worse than the 2.1% drop projected. Shipments to the United States slumped 10.1%, led by a 28.4% slide in automobiles, while exports to China and the European Union fell 3.5% and 3.4%, respectively. Imports contracted 7.5%, a smaller decline than forecast, leaving the overall balance in the red. The weak trade showing contrasted with a rebound in corporate investment indicators. Core machinery orders, a gauge of capital-spending plans, climbed 3.0% in June from the prior month and 7.6% on the year, both far above consensus. Economists said the strength in machinery orders may cushion GDP growth, but the export slump clouds the outlook. The data, released amid a global tech sell-off, weighed on Japanese equities. The Nikkei 225 dropped as much as 1.8% to below 43,000, with chip-related stocks leading losses. SoftBank Group tumbled up to 9% before paring some of the decline. Investors are now awaiting Federal Reserve Chair Jerome Powell’s speech at Jackson Hole later this week for signals on U.S. monetary policy.