Economic Forecasts

Trade Deficit Narrows Again in June, a Trend Likely to Continue

Kiplinger’s latest forecast on the direction of the trade deficit

Kiplinger's Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or for more information.

If you already subscribe to the print edition of the Letter, click here to add e-mail delivery and the digital edition at no extra cost.

The trade deficit fell again in June to a six-month low, hitting a seasonally adjusted $79.6 billion, versus $84.9 billion in May. The trade gap has narrowed over the past three months thanks to slowing domestic demand, and will likely continue on this path in coming months.

Exports rose for the fifth consecutive month in June. Total exports rose 1.7% due to stronger demand overseas for U.S. goods, with industrial supplies and materials and food and beverages leading the monthly gain. Service exports rose 1% on stronger inbound tourism and demand for transport. Tourism exports are still 34% below prepandemic levels, so there is plenty of room for them to see stronger growth over the coming months. On the imports side, the 0.3% decrease was driven by a slump in imports of auto parts. Slower domestic demand in general has begun to weigh on import growth. Services imports rose 0.7% on gains in both business services and travel. The U.S. has historically run a surplus in services trade, though that has declined throughout the pandemic. A rebound in services activity should boost the surplus and help narrow the broader trade deficit.

Trade flows will be more balanced going forward. The slowdown in import growth alongside the resilience of export growth, despite rising economic headwinds abroad, means smaller trade deficits. With the Federal Reserve poised to move monetary policy into restrictive territory in the coming months, and inflation remaining high through the end of 2022, the ongoing slowdown of the U.S. economy should dampen total trade flows in the second half of the year.

Source: Department of Commerce, Trade Data

Most Popular

You'll Save More on Green Home Improvements Under the Inflation Reduction Act
Tax Breaks

You'll Save More on Green Home Improvements Under the Inflation Reduction Act

Tax credits for energy-efficient home improvements will be extended and expanded by the Inflation Reduction Act.
August 12, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 25 Cheapest U.S. Cities to Live In
places to live

The 25 Cheapest U.S. Cities to Live In

Take a look at our list of American cities with the lowest costs of living. Is one of the cheapest cities in the U.S. right for you?
August 7, 2022

Recommended

Kiplinger's Economic Outlooks
Economic Forecasts

Kiplinger's Economic Outlooks

Regularly updated insights on the economy’s next moves.
August 4, 2022
Most-Overlooked Tax Deductions and Credits for the Self-Employed
Tax Breaks

Most-Overlooked Tax Deductions and Credits for the Self-Employed

If you've recently gone into business for yourself, don't miss these tax breaks for the self-employed.
June 11, 2022
Is a Recession Coming?
Smart Buying

Is a Recession Coming?

With a lot of recession talk out there, we might just talk ourselves into one. We take that risk with Jim Patterson of The Kiplinger Letter. Also, dol…
May 31, 2022
25 Best College Majors for a Lucrative Career
college

25 Best College Majors for a Lucrative Career

One way to increase your chances of earning a good living is to pick a college major that prepares you to work in a field that pays well. Here are som…
May 31, 2022