The U.S. current-account deficit narrowed by $48.4 billion to $190.7 billion in the fourth quarter of 2025, a 20.2 percent improvement from the prior quarter, the Bureau of Economic Analysis reported. As a share of GDP, the deficit fell to 2.4 percent from 3.1 percent — its lowest quarterly ratio in recent memory.
The improvement was driven by two forces. A swing in primary income — essentially earnings on international investments — moved from deficit to surplus, and the goods trade gap shrank. Exports of goods and services rose $32.4 billion to $1.33 trillion, while imports fell $16.0 billion to $1.52 trillion. The combination produced the most favorable quarterly shift in the external accounts in years.
For the full year, the current-account deficit totaled $1.12 trillion, down 5.8 percent from 2024. That brought the annual deficit to 3.6 percent of GDP, compared with 4.0 percent the year before. The steady improvement suggests that rising U.S. export competitiveness and strong investment income are partially offsetting the country's persistent appetite for imported goods.
Beneath the surface, America's net international investment position — the difference between what U.S. residents own abroad and what foreigners own in the United States — remained deeply negative at minus $27.54 trillion. U.S. assets abroad totaled $42.96 trillion against liabilities of $70.49 trillion. Both sides of the ledger grew by roughly $1.6 trillion in the quarter, fueled by rising asset prices and new financial transactions.
Separate BEA data on direct investment patterns through 2024 showed the United Kingdom and the Netherlands as the top destinations for U.S. corporate investment abroad, while Japan, the U.K., and Canada were the largest foreign investors in American businesses. Manufacturing drove the biggest increases on both sides, highlighting the sector's continued importance in global capital flows.
For investors, the narrowing deficit is broadly positive — it means less reliance on foreign capital inflows to finance the gap. But the sheer scale of America's net debtor position remains a long-term vulnerability, particularly if foreign appetite for U.S. assets were ever to wane.