trade deficit

The U.S. trade deficit ballooned 9.5% to $50.1 billion in July, according to the Commerce Department, the biggest monthly increase since 2015. Adjusted for inflation, the trade gap increased to $82.5 billion, its highest level in five months and up from $79.3 billion in June.

“The sharp widening in the nominal trade deficit to a five-month high … suggests that the big boost to GDP growth from net exports in the second quarter will be reversed in the third. But with domestic demand growth still robust, that isn’t a huge concern,” said Andrew Hunter of Capital Economics.

For the first seven months of the year, the U.S. trade deficit has totaled nearly $338 billion, up from $316 billion for the same period last year.

The widening gap comes as the United States has traded retaliatory tariffs with international partners, including tariffs on a combined $100 billion in U.S.-China trade since early July.

trade deficitThe gap for politically sensitive goods with China grew to a record $36.8 billion in July, a 10% monthly increase.

The trade gap with Mexico decreased 25.3% to $5.5 billion, while the gap with Canada increased 57.6% to $3.1 billion. The trade gap with the European Union jumped 50% to a record high of $17.6 billion.

Analysts say increasing demand for oil has driven a rise in imports, but imports of automobiles, computers, and pharmaceutical products have also played a role. Overall, imports of goods and services rose 0.9%. Exports of soybeans and civilian aircraft both decreased in July, as did total exports, which fell 1%.

Despite a deficit in the trade of goods, which increased $4.2 billion in July, to $73 billion, the U.S. still maintains a surplus in services, which fell slightly to $23.1 billion.

The Commerce Department revised downward its trade deficit for June to $45.7 billion, from the previously reported $46.3 billion.

Trade contributed 1.17 percentage points to the economy’s 4.2% annualized growth pace in the second quarter.

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