US trade deficit widens in July
The United States' trade deficit widened for the second straight month in July, reaching the highest level since February, as imports hit an all-time high. The deficit in goods with China and the European Union set records.
The Commerce Department said on Wednesday that the deficit in goods and services the difference between what America sells and what it buys from other countries rose to US$50.1 billion in July from US$45.7 billion in June. Exports slipped 1 per cent to US$211.1 billion. Imports increased 0.9 per cent to a record US$261.2 billion on increased purchases of trucks and computers.
The deficit rose despite efforts by President Donald Trump to bring it down by renegotiating trade agreements and imposing taxes on imports.
The goods deficit with China rose 10 per cent in July to a record US$36.8 billion. The gap with the EU shot up 50 per cent to a record US$17.6 billion and with Canada nearly 58 per cent to US$3.1 billion. The July deficit with Mexico, though, plunged 25 per cent to US$5.5 billion.
So far this year, the trade deficit is up 7 per cent from January-July 2017. Mainstream economists blame persistent US trade deficits on an economic reality that can't be changed much by trade policy: Americans spend more than they produce, and imports fill the gap. The strong US economy is also encouraging Americans to buy more foreign products.
Strong domestic demand
"The core story here is that strong domestic demand is sucking in imports ... the trade deficit likely will be flat-to-higher over the next couple of months," Ian Shepherdson, chief economist at Pantheon Economics, wrote in a research report.
In July, the United States ran a deficit of US$73.1 billion in goods such as cars and machinery but recorded a surplus of more than US$23 billion in services such as education and banking.