US trade deficit hits 10-year high, driven by record imports

The financial district in Manhattan in New York City on Dec 6, 2018.
The financial district in Manhattan in New York City on Dec 6, 2018. PHOTO: AFP

WASHINGTON • The US trade deficit hit a 10-year high in October as Americans used a stronger dollar to snap up record imports, the government reported yesterday.

The result showed the trade gap has continued to swell despite the punitive tariffs imposed this year on allies and adversaries alike by US President Donald Trump, who has focused intently on the subject with the goal of reducing the deficit.

And that is likely to subtract from growth in the final quarter of this year, economists said.

Amid Mr Trump's high-stakes trade war with Beijing, the total trade gap rose 1.7 per cent to US$55.5 billion (S$76.1 billion), driven by all-time high imports, according to the US Department of Commerce.

The deficit in goods trade with China, likewise, continued to expand, rising 2 per cent to US$38 billion, seasonally adjusted, as key exports such as soybeans fell.

Without seasonal adjustments, the US-China trade gap hit an all-time record of US$43.1 billion.

Washington and Beijing have exchanged steep tariffs on more than US$300 billion in two-way trade, locking both sides in a bitter conflict that has so far roiled industry and begun to eat into profits.

With markets increasingly unnerved by the trade war, the economic powers last week agreed to a 90-day truce while they seek to resolve Mr Trump's complaints of unfair trade practices - complaints shared by the European Union, Japan and others.

The October figure handily overshot analyst expectations, and could confirm weaker gross domestic product growth in the fourth quarter.

"The headline deficit is now at a 10-year high, with the non-oil deficit at a record level and rising steadily. Pumping up domestic demand with fiscal easing and picking fights with trading partners does that," said economist Ian Shepherdson of Pantheon Macroeconomics.

Americans bought more medications and imported cars while also taking more vacations, benefiting from the stronger US currency.

Travel by Americans rose by US$200 million, driving up US services imports to a record US$46.9 billion. The deficit in goods also was the highest on record at more than US$78 billion, as US imports of goods and services hit a record high as well, rising 1.5 per cent to US$266.5 billion.

Auto imports - another subject on which Mr Trump is battling the European Union - likewise hit the highest level ever, at US$31.8 billion.

From January to October, the total trade deficit rose more than 11 per cent compared with the same period last year, and the gap in September was US$555 million bigger than initially reported.

Long-suffering soya exports, victim of China's retaliatory tariffs since July, fell by another US$800 million in October while exports of aircraft and parts, also sensitive to trade relations, fell US$600 million.

Meanwhile, there were declines in imports of computers and telecommunications equipment but not enough to offset the strong gains in pharmaceutical and auto imports for the month.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on December 07, 2018, with the headline 'US trade deficit hits 10-year high, driven by record imports'. Print Edition | Subscribe