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 on Thursday.
The result showed the trade gap has continued to swell despite the punitive tariffs imposed this year on allies and adversaries alike by President Donald Trump, who has who has sought to shrink deficits he blames for job losses.
And that is likely to subtract from growth in the final quarter of 2018, economists say.
Amid Trump’s high-stakes trade war with Beijing, the total trade gap rose 1.7 per cent to $55.5 billion, driven by all-time high imports, according to the Commerce Department.
The deficit in goods trade with China likewise continued to expand, rising twopc to $38bn, seasonally adjusted, as key exports like soybeans fell.
Without seasonal adjustments, the US-China goods trade gap hit an all-time record of $43.1bn.
Washington and Beijing have exchanged steep tariffs on more than $300bn in total two-way trade, locking them in a bitter conflict that has so far roiled industry and begun to eat into profits.
With markets increasingly unnerved by the uncertainty surrounding the trade war, the two economic powers last week agreed to a 90-day truce while they seek to resolve Trump’s complaints of unfair trade practices — complaints shared by the European Union, Japan and others.
Drag on growth
But Trump on Tuesday dubbed himself “Tariff Man,” and renewed threats to penalise Beijing should the two sides fail to reach a “real deal” to resolve the dispute.
The October trade deficit handily overshot analyst expectations, and could confirm weaker GDP 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 autos while also taking more vacations, benefiting from the stronger US currency.
Travel by Americans rose by $200 million, driving up US services imports to a record $46.9bn.
The deficit in goods also was the highest on record at more than $78bn, and US imports of goods and services hit a record high as well, rising 1.5pc to $266.5bn.
Auto imports — another subject on which Trump is battling the European Union — likewise hit the highest level ever, at $31.8bn.
From January to October, the total trade deficit rose more than 11pc compared to the same period last year, and the gap in September was $555m bigger than initially reported.
Published in Dawn, December 7th, 2018