Kiplinger Trade Outlook: Trade Gap Widens on Back of Stronger Imports

Surging imports amid weak exports cause the trade deficit to grow.

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The trade deficit expanded in July to its highest level in four months. The U.S. trade deficit in goods and services rose to a seasonally adjusted $78.3 billion, from a downwardly revised $59.1 billion in June. The total volume of trade rose, reflecting an $800 million decline in exports and a much larger $12.8 billion increase in imports. The goods deficit jumped to $103.9 billion, while the services trade surplus that the country typically enjoys shrank to $25.6 billion. The trade deficit is a measure of the difference between what the United States buys from foreign nations and what it sells abroad. Year-to-date, exports have increased 5.5%, while imports have increased 10.9% from the same period a year ago.

Total exports rose 0.3% from the previous month. Goods exports rose just 0.1% as greater outbound shipments of computer accessories, civilian aircraft, trucks/buses and special-purpose vehicles were largely offset by decreases in other goods and industrial supplies. Exports of services rose 0.6% due to a small increase in sales of transportation services. Exports of intellectual property increased, as well. It is worth noting that travel, a significant component of U.S. services exports, fell in July, as spending by foreign visitors in the United States declined.

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Imports rebounded in July, with total imports up 5.9%. Higher imports of industrial supplies and materials led the 6.9% rise in goods imports. July’s data also showed a sharp increase in imports of nonmonetary gold. The rise in imports was broad-based, with container imports nearing their all-time high, driven by a rebound in volumes from China and other Asian trading partners. Imports of services rose 2.3% on the back of stronger travel and transport imports.

The U.S. trade balance will remain in flux until trade policy settles. The Trump administration reached several trade deals in early August, placing an average base tariff of 15% to 25% on most countries. The trade deficit should slowly but steadily start shrinking in coming months as long as tariffs remain in place, though that is uncertain, given the recent request by the administration to review a ruling by a U.S. Court of Appeals that found many of the tariffs were illegal. A ruling by the Supreme Court isn’t expected until mid-November.


Source: Bureau of Economic Analysis

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Rodrigo Sermeño
, The Kiplinger Letter

Rodrigo Sermeño covers the financial services, housing, small business, and cryptocurrency industries for The Kiplinger Letter. Before joining Kiplinger in 2014, he worked for several think tanks and non-profit organizations in Washington, D.C., including the New America Foundation, the Streit Council, and the Arca Foundation. Rodrigo graduated from George Mason University with a bachelor's degree in international affairs. He also holds a master's in public policy from George Mason University's Schar School of Policy and Government.