US Trade Deficit in August Was Widest in 14 Years

The US trade deficit rose to $67bn in August as the world’s largest economy recovered from the shock of the pandemic. This undercuts President Donald Trump’s hopes of slashing the gap between America’s imports and exports.

The monthly figure was the widest in 14 years, according to data released by the US Census Bureau on 6 October, as imports rose 3.2 per cent while exports increased 2.2 per cent.

The trade data were the last before the US presidential election. It showed that demand for foreign goods from American consumers and businesses was bouncing back more rapidly than America’s export machine.

Throughout his time at the White House, Trump has vowed to sharply cut the US trade deficit, engaging in a series of economic conflicts with America’s allies and its strategic competitors.

But latest data showed that in macroeconomic terms Trump’s trade strategy did not yield the results he was looking for. In terms of goods alone, the US in August recorded a trade gap of $26.4bn with China, $15.7bn with the EU and $12.5bn with Mexico — the three main trading partners with which Trump has repeatedly clashed on the issue throughout his presidency. For the year to the end of August, the trade deficit was 5.7 per cent higher than it was in 2019.

James Watson, senior US economist at Oxford Economics, said: “Trade is recovering, but very unevenly. Exports lag well behind imports, and trade in services is suffering far worse than trade in goods.”

The 2020 election campaign has been far less driven by clashes over trade than the presidential race four years ago, as Trump’s handling of coronavirus and the recession triggered by the virus have dominated the race.

Trump had hoped that his “phase one” agreement with China, which was signed in January and halted new tariff increases in exchange for large-scale Chinese purchases of US goods, would prove that he had confronted unfair trade practices by Beijing more successfully than his predecessors. Under the “phase one” deal signed in January, China is supposed to increase purchases of U.S. goods and services by $200 billion above 2017 levels over two years. That includes $76.7 billion in increased purchases in 2020 and $123.3 billion in 2021.

However, China’s purchases of American goods, including agricultural products, have fallen short of expectations under the deal. Bilateral tensions continues to flare because of the pandemic. Now we have a “fake” deal and a “fake” President that no one can deal with.

 

References:

1. US trade deficit in August was widest in 14 years, James Politi, October 6, 2020, www.ft.com

2. US trade deficit climbs in August to $67.1 billion and hits third highest level on record, Jeffrey Bartash, October 6, 2020, www.marketwatch.com

3. US goods trade deficit in August hits record high, Doug Palmer, October 6, 2020, www.politico.com