US trade gap edges up; deficit with China at 11-month high

China Shipping containers sit on a ship in the Port of Los Angeles after being imported to the US, California on Oct 7, 2010.
China Shipping containers sit on a ship in the Port of Los Angeles after being imported to the US, California on Oct 7, 2010.PHOTO: REUTERS

WASHINGTON (REUTERS) - The US trade deficit increased less than expected in July as both exports and imports fell, suggesting that trade could contribute to economic growth in the third quarter.

The Commerce Department said on Wednesday (Sept 6) the trade gap rose 0.3 per cent to US$43.7 billion (S$59.1 billion). June's trade deficit was revised down slightly to US$43.5 billion from the previously reported US$43.6 billion.

When adjusted for inflation, the trade deficit increased to US$61.6 billion from US$60.8 billion in June. The so-called real goods deficit in July was below the second-quarter average of US$62.4 billion.

While that suggests trade could add to gross product in the third quarter, economists at Wrightson ICAP cautioned that Hurricane Harvey could significantly impact commodity prices and trade volumes, and push up the trade deficit in September.

The politically sensitive US-China trade deficit increased to an 11-month high in July. That ongoing deficit has grabbed the attention of President Donald Trump, who has blamed it for helping to decimate US factory jobs as well as stunting US economic growth.

Mr Trump, who argues that the United States has been disadvantaged in its dealings with trade partners, has ordered the renegotiation of the North American Free Trade Agreement (NAFTA), which was signed in 1994 by the United States, Canada and Mexico.

On Saturday, Mr Trump threatened to withdraw from a free trade deal with South Korea.

The government reported last month that trade contributed two-tenths of a percentage point to the economy's 3.0 per cent annualized growth pace in the second quarter.

In July, real goods exports slipped despite petroleum exports hitting a record high.

Exports of goods and services fell 0.3 per cent to US$194.4 billion in July. Exports of motor vehicles and parts fell by US$0.6 billion, but exports of capital goods rose by US$0.9 billion.

Exports to China increased 3.5 per cent, while those to the European Union tumbled 9.8 per cent.

Imports of goods and services slipped 0.2 per cent to US$238.1 billion in July. Imports of motor vehicles and parts fell by US$0.8 billion and crude oil shipments declined by US$1.0 billion.

Imports of goods from China increased 3.1 per cent. The politically sensitive US-China trade deficit increased 3.0 percent to US$33.6 billion in July, the highest level since August 2016.

The United States saw a 3.7 per cent drop in goods and services imported from the EU in July. The trade deficit with the EU increased 7.9 per cent to an eight-month high of US$13.5 billion.