Today, Wednesday September 5, the Department of Commerce reported that the U.S. trade deficit climbed to $50.1 million in July. (Economists surveyed by Bloomberg had projected a deficit of $50.2 billion.) That was up from $45.7 billion in June and the largest increase in the gap in three years. Exports fell 1% due to big drops in shipments of aircraft and soybeans. Imports rose 0.9%.
The deficit with China in goods rose to a record $36.8 billion on an unadjusted basis in July. That was up from $33.5 billion in June.
The higher trade deficit will take a bite out of third quarter GDP–just as the narrower trade gap in the second quarter pushed up GDP growth in that period to a revised 4.2%.
Economists note that rhetoric from trade-war hawks aside, a higher trade deficit is what would be expected in a period when the U.S. economy is growing so strongly that some companies are having trouble meeting demand. Under those conditions, U.S. companies frequently resort to importing more goods to meet short-term increases in domestic demand.
The Trump administration is on the verge of imposing new tariffs on a additional $200 billion in Chinese goods. The public comment period for those higher tariffs ends tomorrow, September 6.
