Current Account Deficit Widens to $246.0 Billion, 3.0% of GDP

The broadest measure of the country’s trade and income position with the rest of the world got worse in the spring. The U.S. current account deficit widened by $33.4 billion, or 15.7 percent, to $246.0 billion in the second quarter of 2026, the Bureau of Economic Analysis reported on Thursday. The first-quarter deficit, revised, was $212.6 billion. Measured against the size of the economy, the second-quarter shortfall was 3.0 percent of current-dollar gross domestic product, up from 2.7 percent in the first quarter.

The report has two halves. The first describes the flow of trade, income and transfers during the quarter. The second is a balance sheet, the net international investment position, which moved by far larger amounts than the flows. Both are relevant to anyone following GDP growth, because the external accounts show who is financing domestic demand and at what cost.

What widened the current account deficit

The BEA attributes the widening to a larger deficit on goods, partly offset by smaller deficits on primary income (earnings on cross-border investment and compensation of employees) and on secondary income (current transfers). Imports of goods and services and income payments to foreign residents rose $92.2 billion to $1.69 trillion. Exports of goods and services and income received from foreign residents rose $58.8 billion to $1.44 trillion. The increase in imports exceeded the increase in exports by $33.4 billion, the same amount as the change in the deficit.

On both sides the increases came from goods and from primary income. The goods balance is the largest component of the deficit; in the first quarter it stood at minus $250.9 billion. The services balance moves in the opposite direction: the first-quarter surplus on services was revised up to $92.1 billion from $85.1 billion. That is the usual shape of the American accounts, in which a large surplus in services such as finance, travel and intellectual property offsets only part of a larger goods deficit.

Capital-transfer receipts decreased $1.1 billion to $2.3 billion, and capital-transfer payments decreased $0.9 billion to $1.0 billion, small amounts in a report whose headline numbers are in the hundreds of billions.

Financing the deficit

The financial account is the mirror image. Net financial-account transactions were minus $369.7 billion in the second quarter, which the BEA describes as net U.S. borrowing from foreign residents. Transactions in the quarter increased American residents’ foreign financial assets by $663.3 billion and increased U.S. liabilities to foreign residents by $978.9 billion. In plain terms, foreign investors added $978.9 billion in claims on the United States while Americans added $663.3 billion abroad, a difference of $315.6 billion. The remainder of the net borrowing figure reflects net transactions in financial derivatives, which the BEA includes in the net total.

The quarter-to-quarter comparison is complicated by revisions to the first quarter. The BEA lowered the first-quarter current account deficit to $212.6 billion from $226.8 billion, with the services balance higher by $7.0 billion, the primary income balance lower by $2.5 billion to minus $15.8 billion, and the secondary income balance improved by $9.8 billion to minus $38.0 billion. Net financial-account transactions for the first quarter were revised to minus $295.2 billion from minus $209.0 billion. Those changes make the second-quarter widening look larger than it would have against the originally reported base: the original comparison was against a deficit of $226.8 billion.

The investment position falls $1.15 trillion

The net international investment position, the difference between what U.S. residents own abroad and what foreign residents own here, was minus $22.42 trillion at the end of June. At the end of March it was minus $21.27 trillion, as revised. The net position therefore fell by about $1.15 trillion in a single quarter.

U.S. assets totaled $46.97 trillion and liabilities $69.39 trillion. Assets increased by $3.72 trillion in the quarter, with increases in all major investment categories except reserve assets. Liabilities increased by $4.87 trillion, with increases in all major categories and particularly portfolio investment. The gap between the two increases, $1.15 trillion, is the change in the net position.

Most of that movement is price changes and not new investment. For assets, price changes accounted for $3.03 trillion of the increase and financial transactions for $663.3 billion. For liabilities, price changes were $3.95 trillion and transactions $978.9 billion. Price changes raised liabilities by $3.95 trillion and assets by $3.03 trillion, and because liabilities start from a larger base ($64.52 trillion against $43.25 trillion at the end of March, as revised), the same percentage move in prices widens the net gap. The BEA singles out portfolio investment as the main source of the rise in liabilities, which is consistent with higher valuations of American securities held by foreign investors.

The net position is a measure of stock, not of cash owed in the near term, and valuation swings of this size can reverse. But the figure is large relative to the economy. At $22.42 trillion it is many times the annual current account deficit, and the investment income paid on those liabilities is one reason the primary income balance matters.

Why it matters for GDP growth

The current account deficit of 3.0 percent of GDP is a ratio of the external imbalance to the economy. In GDP accounting, a larger goods deficit subtracts from growth in the quarter in which imports rise faster than exports. That arithmetic is separate from the current account, which includes income and transfers, but the two move in the same direction when goods dominate. The BEA’s separate GDP estimates carry the detail on how much net exports contributed to second-quarter growth.

Next on the calendar is the third-quarter report, scheduled for December 18, when the second-quarter figures will be superseded. Another widening would take the deficit further above the 2.7 percent first-quarter ratio, and a reversal in asset prices would likely shrink the investment position deficit without any change in trade patterns.