International Development News
Development News Edition
Give Feedback

Stronger dollar makes US trade deficit surge due to increased imports

Devdiscourse News Desk Washington DC
Updated: 06-12-2018 22:39 IST

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 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 USD 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 two per cent to USD 38 billion, seasonally adjusted, as key exports like soybeans fell. Without seasonal adjustments, the US-China goods trade gap hit an all-time record of USD 43.1 billion.

Washington and Beijing have exchanged steep tariffs on more than USD300 billion 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.

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 USD200 million, driving up US services imports to a record USD46.9 billion. The deficit in goods also was the highest on record at more than USD78 billion, and US imports of goods and services hit a record high as well, rising 1.5 per cent to USD266.5 billion.

Auto imports -- another subject on which Trump is battling the European Union -- likewise hit the highest level ever, at USD31.8 billion.

From January to October, the total trade deficit rose more than 11 per cent compared to the same period last year, and the gap in September was USD555 million bigger than initially reported.

Long-suffering soy exports, a victim of China's retaliatory tariffs since July, fell by another USD800 million in October while exports of aircraft and parts, also sensitive to trade relations, fell USD 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.

A few bright spots showed US services exports were the highest on record, at nearly USD70 billion for the month, despite the stronger US dollar.

Wall Street opened sharply lower following the release of the trade data but investors were more unnerved by Wednesday's news of the arrest of a top Huawei executive at Washington's behest -- casting doubt on the future of last week's trade truce with China.

(With inputs from agencies.)