US trade deficit jumps to six-month high in August

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The US trade deficit increased to a six-month high in August as exports dropped further amid declining soybean shipments and imports hit a record high, suggesting that trade could weigh on economic growth in the third quarter.

The Commerce Department said on Friday the trade gap increased 6.4 percent to 53.2 billion US dollars, widening for a third straight month. Data for July was revised to show the trade deficit rising to 50.0 billion US dollars, instead of the previously reported 50.1 billion US dollars.

The trade gap continues to widen despite the Trump administration's “America First” policies, which have led to a bitter trade war between the United States and China.

Washington has also engaged in tit-for-tat import duties with the European Union, Canada and Mexico. The United States has since struck a trade deal with Canada and Mexico.

Reuters Photo

The Trump administration says eliminating the trade deficit will put the economy on a sustainable path of faster growth, an argument that has been dismissed by many economists as flawed given constraints such as low productivity and slow population growth.

When adjusted for inflation, the trade gap widened to 86.3 billion US dollars in August, the highest since January 2006, from 82.4 billion US dollars in July. The jump in the so-called real trade deficit suggests that trade could subtract as much as one percentage point from gross domestic product in the third quarter.

Trade contributed 1.2 percentage points to the economy's 4.2 percent annualized growth pace in the second quarter, mostly reflecting a front-loading of soybean exports to China before Beijing's retaliatory tariffs came into effect in early July.

Exports of goods and services fell 0.8 percent to 209.4 billion US dollars in August. Soybean exports dropped 1.0 billion US dollars and shipments of crude oil fell 0.9 billion US dollars.

Imports of goods and services increased 0.6 percent to a record 262.7 billion US dollars in August. They were boosted by imports of motor vehicles, which were the highest on record, and cellphones. There were also increases in petroleum imports.

Source(s): Reuters