The U.S. trade deficit narrowed to $60.2 billion in June, its smallest since September 2023 and below the $61 billion economists had anticipated, the Commerce Department’s Bureau of Economic Analysis said on Tuesday. The gap in goods and services fell 16% from May’s revised $71.7 billion, marking the steepest monthly improvement in nearly two years. Imports dropped 3.7% to $337.5 billion as companies pared back purchases of consumer goods, industrial supplies and vehicles after front-loading orders earlier in the year. Exports slipped 0.5% to $277.3 billion. The swing in trade flows has helped bolster second-quarter GDP, reversing the drag seen at the start of 2025. Tariff policy was a dominant driver. The average U.S. tariff rate has climbed to roughly 18.3%—the highest since 1934—following successive rounds of duties unveiled by President Donald Trump. Those levies are reshaping bilateral balances: the U.S. deficit with China shrank by about a third to $9.5 billion in June, the narrowest in more than 21 years, as imports from China fell to their lowest level since 2009. Businesses, however, report rising costs and softer activity in the services sector as they adjust to the higher trade barriers.