US trade deficit hits 9-month high

Gap widens despite strong exports to China, Mexico

The US trade deficit increased to a nine-month high in October due to rising oil prices and the widening of the US’ long-standing deficits with China and Mexico.

The worsened trade deficit came even as exports to China and Mexico were the strongest in more than three years, which some economists said challenged the Trump administration’s argument that the US was being disadvantaged in its dealings with trade partners.

“This leaves the Trump economics team empty-handed when it comes to its mission to improve the unfair terms of trade, which sent factories offshore starting a couple of decades ago,” said Chris Rupkey, chief economist at MUFG in New York.

The US Commerce Department said on Tuesday the trade gap widened 8.6 percent to $48.7 billion, the highest level since January.

The politically sensitive US-China trade deficit increased 1.7 percent to $35.2 billion while the deficit with Mexico surged 15.9 percent to $6.6 billion in October.

Economists polled by Reuters had forecast the overall trade deficit rising to $47.5 billion in October. US financial markets were little moved by the large trade shortfall, which was flagged in an advance report last week.

Republican President Donald Trump has blamed the trade deficit for the massive loss of US manufacturing jobs as well as moderate economic growth. Trump has ordered the renegotiation of the North American Free Trade Agreement (NAFTA), which was signed in 1994 by the US, Canada and Mexico.

He told a group of pro-NAFTA Republican senators during lunch on Tuesday that the US had trade deficits with “everybody.”

“And that’s going to be changing – it’s already changing – but it’s going to be changing fast,” Trump said, adding that NAFTA negotiations were “going to be very successful.”

NAFTA talks have stalled, with Mexico and Canada rejecting a US proposal to raise the minimum threshold for autos to 85 percent North American content from 62.5 percent as well as to require half of vehicle content to be from the US.