Despite Trump’s efforts to attack the trade deficit, so far this year it has risen 8.6 percent over the same period in 2017 (GREG BAKER)
Washington (AFP) – The US trade deficit ballooned in August to its highest level in six months as exports of tariff-targeted goods fell while American consumers snapped up imported cars and mobile phones, the government reported Friday.
The result, which showed mounting pressures on trade from US President Donald Trump’s entrenched conflict with China, still came at a triumphant moment for the American leader, who has reveled in a new agreement to remodel North America’s trading system.
The August figures suggested retaliatory tariffs imposed by China continued to whipsaw American farmers, whose rural counties Trump’s Republican party traditionally counts on for political support.
The numbers also reflect reports that businesses have rushed to import goods before tariffs hit on China in late August and September, including importing products needed in stores for the holiday shopping season, driving up the trade gap.
Economists said the unexpectedly poor trade numbers could slow economic growth in the third quarter.
“Even adjusting for price changes, it looks like the trade deficit widened significantly in the third quarter, greatly slowing growth,” economist Joel Naroff said in a client note.
With US imports of goods and services at their highest on record, the result pushed the goods deficits with China and Mexico to all time-highs, according to the Commerce Department report.
– Weighing on GDP –
The total US trade deficit rose 6.4 percent over July to $53.2 billion, overshooting analyst forecasts which had called for a smaller five percent increase. That was on exports of $209.4 billion and record imports of $262.7 billion.
Despite Trump’s efforts to attack the trade deficit, so far this year it has risen 8.6 percent over the same period in 2017.
The gap in goods trade with China rose to $38.6 billion for August and with Mexico hit $8.7 billion — both the highest monthly totals ever.
At $31.1 billion, imports from Mexico also were the highest ever.
And soybean exports, a sector highly dependent on trade with China, plunged a painful $1 billion from July, when Beijing unveiled retaliatory duties in response to Trump’s escalating trade fight.
Meanwhile, US exports of crude oil and other petroleum products fell by a combined $1.6 billion for the month, but this was offset by $1.6 billion jump in exports of artwork, antiques and pharmaceuticals, the Commerce Department reported.
Exports of corn, juices, auto parts, crude oil and gold also fell.
On the other side of the ledger, imports of autos rose $1 billion while imports of mobile phones and other household goods rose by $900 million.
Americans and US companies also bought more foreign gems, jewelry, telecommunications equipment an aircraft parts.
But imports of lumber fell for the month. Washington has put steep tariffs on Canadian lumber in a long-standing dispute with Ottawa that has seen costs rise for newly built homes in the United States.
Jim O’Sullivan of High Frequency Economics said trade had boosted GDP growth in the second quarter — adding perhaps 1.2 percent as Chinese importers rushed to stock up on American soybeans before a round of tariffs by Beijing hit in July.
But now “net exports are likely to subtract at least 1.5 points in Q3,” he said in a research note.
Wall Street was sharply lower following the news, amid a sell-off sparked by a sudden jump in bond yields that accelerated after jobs numbers suggested the Federal Reserve is likely to continue tightening interest rates.
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