US imports surge to highest level
Trade gap widens 10% in 2018 and deficit with China keeps swelling on robust spending by American companies and consumers
A hungry US economy powered by a strong dollar drew record imports in September, driving the trade deficit to its highest level in seven months, the US government reported on Friday.
Amid President Donald Trump’s trade war with Beijing, the trade deficit with China swelled as crucial soya bean exports — a sore spot for Republicans in Tuesday’s midterm elections — continued to suffer.
With rising wages and low unemployment, Americans purchased more foreign-made telecommunications equipment, computers, cellphones, aircraft engines, clothing and toys, the commerce department said.
The US trade deficit posted its fourth straight monthly increase, rising 1.3% to a seasonally adjusted $54bn, significantly overshooting analyst forecasts, as imports hit $266.6bn, the highest level yet recorded. Exports rose to $212.6bn.
The US trade gap has increased a steep 10.1% so far in 2018 and should weigh on GDP calculations in the third quarter, although many estimates may already have factored in the trade drag.
Trade with China, a central target of Trump’s aggressive economic agenda, was a clear culprit, as the deficit in goods with the world’s second-largest economy jumped $3bn to $37.4bn, seasonally adjusted.
Goods imports from China hit a record of $47.7bn, seasonally adjusted, an increase of $3.5bn from August.
The trade report showed US producers sold more gold, petroleum products and civilian aircraft, but exports of soya beans fell $700bn from August, largely the result of the trade spat with China.
US imports rose faster than exports on robust spending by companies and consumers, driving the US goods deficit to its highest level yet at $76.3bn. US goods imports were the highest yet, at $217.6bn.
Analysts say recent tax cuts and fiscal stimulus should support demand, keeping imports high and allowing the trade gap to widen further.
Excluding oil and aircraft, US exports fell at an annual rate of 8.6%, which Ian Shepherdson of Pantheon Macroeconomics called “grim”.
Trump said on Thursday that he had spoken to Chinese President Xi Jinping about trade confrontation and the leaders are expected to meet late in November at the Group of 20 summit in Argentina. That will be a chance for the two to work towards ending a deadlock, which has imposed steep tariffs on hundreds of millions of dollars in two-way trade.
However, senior White House economic adviser Larry Kudlow poured cold water on expectations for a breakthrough. “Look, there’s no massive movement to deal with trade,” Kudlow told CNBC on Friday.
Markets, manufacturers and importers are bracing for a stiff increase in US duties on Chinese goods, which are due to rise to 25% on January 1. Trump has imposed tariffs on more than $250bn in imports from China, alleging massive state intervention, and has sought leverage in talks by threatening to put duties on all Chinese imports.
Wall Street interrupted last week’s rally, closing down sharply on fears that the US-China trade war could worsen.
“The risks from a trade war remain our biggest concern in light of recent events,” Oxford Economics said in a research note.