Remember meForgot password?
    Log in with Twitter

article imageUS trade deficit expands in June amid growing tensions

By Douglas Gillison (AFP)     Aug 3, 2018 in World

The US trade deficit swelled in June by the largest amount in 19 months, reversing much of May's trade-war driven export bonanza, even as brinkmanship between Beijing and Washington worsened.

A dip in auto exports and rising oil prices in June drove the increase in the gap between US imports and exports, the Commerce Department reported Friday.

Bilateral US deficits widened with China, the European Union, Canada and Mexico, all trading partners that have retaliated against President Donald Trump's multi-front global trade war.

Shortly before the numbers were released, Beijing warned it was ready to impose new tariffs on $60 billion in American products, responding to Trump's plans to jack up the punitive duties on the next $200 billion in Chinese goods to be targeted.

The White House quickly fired back, calling Beijing's latest counter-threat "weak." Top economic aide Larry Kudlow warned China it "better not underestimate" Trump's resolve in the conflict.

The US trade deficit rose 7.3 percent or $3.2 billion in June to $46.3 billion, overshooting analyst expectations in the largest jump since November 2016, according to the Commerce Department.

The result could weigh on revised calculations of second quarter growth in the United States, which Trump hailed as a key achievement last week after it was reported as the strongest GDP increase in nearly four years.

In May, a rush by Chinese importers to beat Beijing's looming counter-tariffs led to a surge in US exports of crude oil and soybeans, temporarily driving down the deficit and boosting GDP growth in the April-June period.

While soybean exports continued to rise in June, US shipments of automobiles, aircraft and pharmaceuticals fell.

Ian Shepherdson of Pantheon Macroeconomics warned that "a big decline is coming" in the third quarter, which should boost the trade gap by about $3 billion a month.

- Exports and the strong dollar -

China-US trade in goods
China-US trade in goods

"Exports will rise over the quarter, but strong domestic demand growth will lift imports more rapidly," he said in a client note.

Trump has said trade wars are "easy to win" and made the soaring US-China goods deficit -- which rose to $32.5 billion last month -- a principal issue in his nationalist economic agenda.

But industry and allies in his Republican Party have expressed fear the dispute could spiral out of control.

Meanwhile, the deficit declined with Japan but that came amid an overall decline in trade between the world's largest and third-largest economies.

Average prices for imported oil hit the highest level since December 2014 at $73.60 a barrel -- bringing the value of oil imports for the month to $19.6 billion, also the highest in three and a half years.

Rising oil prices also boosted the value of American crude exports, which were the highest on record at $20.4 billion.

As the Federal Reserve gradually tightens interest rates, the US dollar also has risen steadily since April, making American exports more expensive to foreign buyers.

Exports of US capital goods like aircraft and engines fell, along with pharmaceuticals and jewelry. But the growing US economy, hungry for consumer goods and industrial supplies, imported nearly $3 billion more in medicines and crude oil.

Oxford Economics said the escalating trade battle between Washington and Beijing made the future even more difficult to predict.

"Our modeling indicates a trade war with China would have clear, negative implications for the US economy," the forecasting firm said in a research note.

More about US, Trade, Deficit, indicator
More news from
Latest News
Top News