U.S.’s Trade Deficit Grew in July

When President Trump took office in January of last year, he brought a renewed interest to a figure that hadn’t been as talked about previously: the U.S.’s trade deficit. In other words, the United States imported more goods than it exported during the month. Trump has often cited the trade deficit when speaking on the needs for tariffs, saying that other countries were taking advantage of us. That’s why it’s interesting to note that the U.S. trade deficit actually increased by 10% during the month of July.

As MarketWatch reports, the Commerce Department announced that the deficit reached $50.1 billion in July — up from June’s $45.7 billion. This is the result of imports increasing by 0.9% to reach $261.2 billion while exports decreased 1% to $211.1 billion. Among the export products that saw dips from the previous month were soybeans, although it’s likely that the surge in June was due to foreign importers looking to beat the retaliatory tariff deadline.

One of the more interesting reasons why the trade deficit is widening actually points to a strong U.S. economy. As the theory goes, Americans are purchasing more imports because they have more money to spend while other countries with less booming economies aren’t purchasing as many American imports. On top of that, a strong dollar means favorable exchange rates for stateside buyers, making imports cheaper.

Although some have mocked the President’s stance on the trade deficit, accusing him of not comprehending what the figure represents, it is true that a growing trade deficit could serve to dampen GDP growth. Speaking to MarketWatch, Andrew Hunter of Capital Economics explained, “The sharp widening in the nominal trade deficit to a five-month high … suggests that the big boost to GDP growth from net exports in the second quarter will be reversed in the third.” However he added, “But with domestic demand growth still robust, that isn’t a huge concern.” You may recall that the U.S. GDP grew by an impressive 4.2% in Q2 while economists estimate a 3% growth for Q3.

Surely the administration won’t be pleased to hear that the trade deficit is widening instead of retracting. That said a lot has happened on the trade front since July, including the announcement of a tentative trade deal with Mexico to potentially replace NAFTA. Thus you can bet there will be many watching these figures closely in the coming months.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

Marqeta Expands Credit Program with New APIs and More

A FinTech that specializes in creating credit card experiences is rolling out some new features. This week, Marqeta announced what it calls a "significant expansion" of its credit platform. This includes more than 40 new credit APIs that will further help clients craft and launch their own credit card products. Additionally, the company notes an updated intuitive dashboard. Using this platform, businesses can create unique card options that can not...

PayPal Launches Small Business Credit Card with Flat 2% Cashback

The popular platform PayPal is rolling out a new product built specifically for small businesses. Today, the FinTech announced the launch of The PayPal Business Cashback Mastercard. The new card will be issued by WebBank and marks the first time PayPal has offered a business credit card. With the PayPal Business Cashback card, business owners will be able to earn 2% cashback on all purchases. This earning rate is not...

Wells Fargo Unveils New Autograph Rewards Visa Card

A new rewards credit card is on the way from Wells Fargo. Today, the bank introduced its Autograph card, which expands the company's refreshed card portfolio. In terms of rewards, the Wells Fargo Autograph Card will earn 3 points per dollar spent in a number of categories. These include restaurants, travel and transit, gas stations, select streaming services, and phone plans. All other purchases will earn 1x points. Beyond the...