US trade deficit hits two-year high on imports

“Trade data for July suggest that net trade will weigh on GDP growth in the third quarter, but that is not a cause for concern when it reflects the continued strength of imports, painting a better picture of domestic demand than renewed recession fears would suggest,” said Thomas Ryan of Capital Economics.

The trade gap widened 7.9% to $78.8 billion, the largest since May 2022, according to the Commerce Department’s Bureau of Economic Analysis. Economists polled by Reuters had expected a rise to $79 billion from $73.1 billion reported in June.

The Government has revised trade data for January to June 2024 to incorporate more complete and updated quarterly and monthly figures.

Imports rose 2.1% to $345.4 billion. Goods imports rose 2.3% to $278.2 billion, the highest since June 2022. They were boosted by a surge in capital goods, which rose $3.3 billion to a record high, reflecting mostly computer accessories.

President Joe Biden’s administration has announced plans to impose higher tariffs on imports of electric vehicles, batteries, solar products and other goods from China.

The administration said last week that a final decision would be made public in the “coming days.” There are also fears that even higher tariffs on Chinese imports could be imposed if former President Donald Trump returns to the White House after the Nov. 5 election.

The trade deficit in politically sensitive goods with China widened by $4.9 billion to $27.2 billion. Exports to China fell by $1 billion, while imports rose by $3.9 billion.

“Imports of goods from China rose, showing how difficult it will be to wean American manufacturers off their dependence on low-cost goods from China, if that is what Congress and political candidates want to do,” said Christopher Rupkey of FWDBONDS.

Exports rose 0.5% to $266.6 billion. Exports of goods rose 0.4% to $175.1 billion. Exports of motor vehicles, parts and engines fell $1.7 billion to their lowest since June 2022. Exports of consumer goods fell $0.8 billion.