The U.S. trade deficit widened in July by the most in three years and the gap with China hit a record as the Trump administration imposed tariffs on a range of Chinese goods, prompting retaliatory levies from Beijing.
The gap increased 9.5 percent to $50.1 billion, the biggest since February, from a revised $45.7 billion in the prior month, Commerce Department data showed Wednesday. Exports fell 1 percent, driven by steep drops in shipments of aircraft and soybeans, while imports rose 0.9 percent in a broad-based gain.
A widening trade deficit would drag on growth in the third quarter after a narrower gap -- partly on higher soybean exports ahead of Chinese levies -- helped boost the pace of expansion in the prior period to the fastest since 2014. While other indicators suggest gross domestic product is on track for solid gains in the second half, the latest figures show how President Donald Trump’s tariffs may start to weigh on the economy.
The goods-trade gap with China widened to a record $36.8 billion on an unadjusted basis, up from $33.5 billion in the prior month, according to the report. The deficit with the European Union jumped to a record $17.6 billion from $11.7 billion, while the gap with Mexico narrowed to $5.5 billion from $7.4 billion.
The increase in the overall trade gap was the biggest since March 2015, the Commerce Department said. The median estimate of economists surveyed by Bloomberg called for a deficit of $50.2 billion.
Exports fell to $211.1 billion, led by a $1.57 billion drop in shipments of civilian aircraft and a $682 million decline in soybeans. Imports increased to $261.2 billion, boosted by computers, oil and vehicles.
Soybean Drop
The 16 percent decline in soybean exports brought the total to $3.53 billion, though shipments year-to-date are still up 43 percent from a year earlier. Corn exports in July fell by about 11 percent to $1.28 billion.
The Trump administration imposed duties on $34 billion of Chinese goods in early July, prompting immediate retaliation from Beijing, and another $16 billion in levies on Aug. 23. Negotiations with Canada to modernize the North American Free Trade Agreement ended without a deal by Friday’s deadline, though talks were scheduled to resume Wednesday.
The China tensions are poised to deepen, which could affect trade even more starting this month. Trump -- who characterizes the deficit as showing how past administrations’ policies have hurt the U.S. -- wants to move ahead with tariffs on $200 billion of Chinese imports as soon as a public-comment period concludes Thursday, Bloomberg News reported last week.