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Trump tariff, trade war: US goods trade deficit increase in July

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President Donald
Trump

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  • One of President Donald Trump’s trade war goals is to
    shrink the US goods trade deficit.
  • Despite the implementation of tariffs, the goods
    deficit grew in July, according to preliminary data from the US
    Census Bureau.
  • Exports declined in July compared to the month before,
    while imports climbed slightly.

One of President Donald Trump’s main goals in his shake-up of US
trade policy: Bring down the large US trade deficit. But
that deficit appears to be heading in
the opposite direction
 since the trade war kicked off in
earnest.

The US goods trade deficit increased to $72.2 billion
in July, up from $67.9 billion in June, according to

advance data from the US Census Bureau
. Exports fell by 1.7%
from the month before, while imports rose by 0.9%. This was the
second straight month the trade deficit has increased.

Trump has repeatedly pointed to the large US goods trade deficit
with countries like China and Mexico as reason to impose tariffs.
Tariffs on Chinese goods, as well retaliatory tariffs against the
US from Canada, Mexico, and the European Union, went into effect
in July.

The monthly growth also means the year-to-date trade deficit is
7% larger than the same period in 2017.

The trade deficit actually narrowed in the second quarter of
2018, which economists said was in part because exporters were
attempting to
move their product ahead of the tariffs
. Daniel Silver, an
economist at JPMorgan, said the latest data appears to show the
export growth trend is moving quickly in the opposite direction.

“We have been expecting net exports to be a significant
drag on third quarter growth as the second quarter surge in
exports unwinds, and this appears to be playing out more rapidly
(and more meaningfully) than we had anticipated,” Silver
wrote in a note to clients.


Screen Shot 2018 08 28 at 11.38.02 AMJPMorgan

The data is only a preliminary accounting, with more robust data
coming next week. And the month-to-month movements of the trade
deficit can get noisy particularly given the big changes in
recent policy. 

But as Trump continues to reshape the global trade landscape, the
deficit can give a real-time look at how it is playing out in
real time.

The data may also contain some more positive news for the
president’s larger economic goals. The increase in inventories
and strong import growth indicate resilient demand from US
consumers that could signal a strong third-quarter GDP reading.

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