The Economy

US Trade Gap Edges up to $43.7B in July

The increase was less than expected but is unlikely to sit well with an administration that is seeking to cut the deficit.
Matthew HellerSeptember 7, 2017

The U.S. trade deficit grew less than expected in July but is still running almost 10% higher through the seven months of the year as rising consumer spending and business investment draw in more imports.

The Commerce Department said Wednesday the trade deficit rose 0.3% to $43.7 billion in July. Adjusted for inflation, it widened to $61.6 billion from $60.8 billion in June.

Economists polled by MarketWatch had forecast a $44.8 billion gap in July.

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Imports slipped 0.2% to $238.1 billion, with imports of crude oil, autos and pharmaceutical goods all declining while computer-related imports rose. Exports slipped 0.3% to $194.4 billion amid declines in shipments of new cars and trucks as well as household goods.

The so-called real goods deficit in July was below the second-quarter average of $62.4 billion, suggesting trade could add to gross domestic product in the third quarter. A larger deficit typically translates into slower growth, because it means Americans are buying more goods from overseas than from the U.S.

The trade gap had narrowed in the spring as exports of U.S. computer products and farm goods rose and exports benefited from a decline in the value of the dollar. Exports in June were the highest in 2½ years.

According to U.S. News & World Report, the overall deficit increase so far this year was “less about export weakness than it was about steady growth in Americans’ own personal spending through the first several months of the year — a positive development for the U.S. economy that likely led to more imports being purchased.”

“Yet President Donald Trump’s administration has placed a heavy emphasis on reining in America’s trade deficits, so Wednesday’s report is unlikely to sit well with an administration that has seen the country’s overall trade gap climb by nearly 10 percent under its watch,” U.S. News said.

The White House also is unlikely to be pleased that the politically sensitive trade gap in goods with China increased to $33.6 billion in July, the highest in a year.