The US trade fight with China is largely to blame for the steep drop in exports of soybeans (MARK WILSON)

Washington (AFP) – A hungry American economy powered by a strong US dollar saw record imports in September, driving the US trade deficit to its highest level in seven months, the government reported Friday.

And amid President Donald Trump’s trade war with Beijing, the US trade deficit with China swelled again, as crucial soybean exports — a sore spot for Republicans in next week’s midterm elections — continued to suffer.

With rising wages and low unemployment, Americans purchased more foreign-made telecommunications equipment, computers, mobile phones, aircraft engines, clothing and toys, the Commerce Department said.

The US trade deficit posted its fourth straight monthly increase, rising 1.3 percent to a seasonally adjusted $54 billion, significantly overshooting analyst forecasts, as imports hit $266.6 billion, the highest level ever recorded. Exports also rose to $212.6 billion

The US trade gap has increased a steep 10.1 percent so far this year.

The expanding trade gap should weigh on GDP calculations in the third quarter, although many estimates may already have factored in the trade drag.

Trade with China, a central target of Trump’s aggressive economic agenda, was a clear culprit, as the deficit in goods with the world’s second largest economy jumped $3 billion to $37.4 billion, seasonally adjusted.

Goods imports from China hit a record of $47.7 billion, seasonally adjusted, an increase of $3.5 billion from August.

The trade report showed American producers sold more gold, petroleum products and civilian aircraft, but exports of soybeans fell $700 billion from August, also largely the result of the trade spat with China.

– Trade truce with China? –

US imports rose faster than exports on robust spending by companies and consumers — driving the US goods deficit to its highest level ever recorded at $76.3 billion.

US goods imports also were the highest ever, at $217.6 billion.

Analysts say recent tax cuts and fiscal stimulus should support demand that outstrips domestic production, keeping imports high and allowing the trade gap to widen further.

Excluding oil and aircraft, US exports fell at an annual rate of 8.6 percent, something Ian Shepherdson of Pantheon Macroeconomics called “grim.”

Trump said Thursday he had spoken to Chinese President Xi Jinping about trade confrontation and the leaders are expected to meet late this month at the Group of 20 summit in Argentina. 

That will be a chance for the two to work towards ending a deadlock, which has imposed steep tariffs on hundreds of millions of dollars in two-way trade.

However, senior White House economic adviser Larry Kudlow poured cold water on expectations for a breakthrough.

“Look, there’s no massive movement to deal with trade,” Kudlow told CNBC on Friday.

Markets, manufacturers and importers are bracing for a stiff increase in US duties on Chinese goods, which are due to rise to 25 percent on January 1.

Trump has slapped tariffs on more than $250 billion in imports from the world’s second-largest economy, alleging massive state intervention and technological theft, and has sought leverage in talks by threatening to put duties on all Chinese imports.

Wall Street interrupted this week’s rally on Friday morning, and turned negative on fears the US-China trade war could worsen, with the Dow down more than 250 points by about 1700 GMT.

“The risks from a trade war remain our biggest concern in light of recent events,” Oxford Economics said in a research note.

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