Washington: The U.S. trade deficit narrowed in June, but the trend is unlikely to be sustained amid strong domestic demand that is being satiated with imports.

The trade shortfall contracted 5.6% to $73.3 billion, the Commerce Department's Bureau of Economic Analysis and Census Bureau said on Tuesday. Economists polled by Reuters had forecast the deficit at $73.0 billion.

Last week the government reported the trade deficit widened further in the second quarter, subtracting a full percentage point from gross domestic product. The economy grew at a 1.5% annualized rate last quarter, though domestic demand, driven by consumers and business ramping up spending on artificial intelligence infrastructure, increased at its fastest pace since the first quarter of 2023. The widening of the trade deficit in Q2 contributed to a larger trade imbalance, but the June contraction suggests a temporary reprieve. Despite the contraction, analysts caution that the underlying supply chain pressures and foreign exchange movements may reverse gains.

Imports dropped 1.8% to $388.0 billion in June. Goods imports fell 2.5% to $309.0 billion. Exports slipped 0.9% to $314.7 billion. Goods exports declined 1.9% to $206.9 billion.