WASHINGTON: The U.S. trade deficit increased slightly in July as exports slipped a bit more than imports, Commerce Department data showed Wednesday. The trade gap reached $43.7 billion in July, up from $43.5 billion in June. Exports declined $600 million to $194.4 billion, while imports slid $400 million to $238.1 billion. The trade deficit had narrowed in the spring as exports of U.S. computer products and farm goods rose. U.S. exporters benefited from a decline in the value of the dollar, which makes American products cheaper overseas. Solid global growth also helped, as economies from Europe to Asia to Latin America are expanding simultaneously. Exports in June were the highest in 2½ years. The report may represent the clearest picture of international trade before Hurricane Harvey and potentially Hurricane Irma distort data from August on. July’s figures showed drops in both exports and imports of passenger cars as the industry grapples with a sales slowdown, while exports of consumer goods fell to the lowest level since May 2016. At the same time, energy shipments rose, with petroleum exports at the highest level in more than two years — and at a record on an inflation-adjusted basis. Exports of civilian aircraft, which can be volatile from month to month, jumped by $1.1 billion to $5.4 billion.
The figures indicate trade was on track to contribute to third-quarter growth after net exports added about 0.2 percentage point to the annual pace of expansion in the previous period. While the storms may disrupt some shipments, improving global demand and a weaker dollar have the potential to drive demand for American-made products. Trade and inventories are the two volatile components that feed into the government’s calculation of gross domestic product, the sum of all goods and services produced within the nation’s borders. Harvey, which made landfall in Texas in late August, disrupted petroleum transport and refining, which accounts for a significant portion of trade, according to Bloomberg Intelligence. It also temporarily shut the Port of Houston, one of the nation’s busiest.
Apart from the destructive storms, U.S. trade policy is up in the air. President Donald Trump campaigned on a pledge to renegotiate free-trade agreements that he says contribute to America’s deficit. Since taking office, he pulled out of the Trans-Pacific Partnership and started revamping the North American Free Trade Agreement, which he says hurt U.S. manufacturing. Trump also has threatened to dissolve a trade pact with South Korea and is considering whether to increase tariffs on steel and aluminum. In July, the U.S.’ goods-trade deficit with China widened by 3 percent to $33.6 billion, the highest since August 2016, while the $13.5 billion gap with the European Union was the biggest since November. Meanwhile, the deficit with Mexico narrowed by 17 percent to $4.9 billion. After eliminating the effects of price fluctuations, which generate the numbers used to calculate GDP, the goods-trade gap widened to $61.6 billion from $60.8 billion.
Exports of services fell to $65.8 billion from $65.9 billion; imports of $44.1 billion were a record. The petroleum deficit narrowed to $3.09 billion, smallest since May 2016; petroleum exports of $10.2 billion were the highest since November 2014; inflation-adjusted exports of $10.9 billion were a record high. Imports of capital goods rose to a record $54.1 billion on computers and accessories, and imports of foods, feeds and beverages rose to a record $11.7 billion on meats and oils. Exports and imports of goods accounted for about three-fourths of America’s total trade in 2016; the U.S. typically runs a deficit in merchandise trade and a surplus in services.