- The US trade deficit swelled 5.9% to $67.1 billion in August, the Commerce Department said Tuesday, reaching its largest level since 2006.
- Economists surveyed by Bloomberg expected the trade gap to widen to $66.2 billion.
- Shipments of consumer goods led the increase in imports and hit a record high as companies prepared for holiday-season spending.
- President Trump frequently pointed to the trade deficit as a gauge of his trade policies’ success. The growing gap gives him little to brag about heading into the 2020 presidential election.
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The US trade deficit swelled to its largest since 2006 in August as holiday-season importing accelerated.
The gap in trade of goods and services grew 5.9% to $67.1 billion last month, the Commerce Department said Tuesday. Total exports climbed 2.2% to $171.9 billion. Imports jumped 3.2% to $239 billion.
Economists surveyed by Bloomberg expected the deficit to balloon to $66.2 billion.
Outbound shipments of industrial supplies and materials led the overall increase in exports. Imports of consumer goods climbed by $3.8 billion to a record high as the US prepared for increased spending during the holiday season.
While indicators suggest the US manufacturing sector has enjoyed a steady recovery, the new trade data shows firms increasingly relying on international sources to fulfill domestic demand.
President Donald Trump frequently pointed to the trade deficit as the key gauge of his trade policies’ effectiveness. The gap had been slowly closing through 2019 before the coronavirus slammed the global economy. American firms quickly responded by reducing inventories.
As the economy bounced back, companies increased imports and erased improvements made to the trade deficit last year. Exporting swung higher as producers recovered, but the pace has yet to match US import activity.
The worsening deficit leaves Trump with little to brag about heading into the 2020 presidential election. The trade shortfall was a key tenet of the president’s 2016 campaign platform and drove Trump to ignite a trade war with China in 2018. A slew of tariffs on Chinese goods failed to close the trade gap and several economists blame the aggressive trade policies for harming US workers. Taxes on Chinese imports were frequently passed down to consumers, and retaliatory measures from China weakened US producers’ competitiveness.
Apart from being largely ineffective, the US’s tariffs were ruled by the World Trade Organization in September to have violated international trade rules. The organization found that the duties unfairly targeted China and skirted the WTO’s dispute settlement body. Still, the Trump administration’s gutting of the WTO’s appellate body effectively allows the White House to veto the decision and avoid enforcement.