The U.S. trade deficit widened in July, effectively reaching its highest gap in the past three years. The Commerce Department reported that the trade gap jumped for the second straight month by 9.5% to $50.1 billion, while the June data was revised to show the trade deficit rose to $45.7 billion versus the initial reporting of $46.3 billion.
The byproduct of the tit-for-tat trade war between the United States and China was evident in the data as the politically-sensitive goods trade deficit with China logged a 10% increase to a record $36.8 billion. All in all, exports fell 1% due to a decline in aircraft and soybean shipments, while imports climbed by 0.9%.
The latest trade deficit figures underscore the impact of U.S. President Donald Trump’s tariff battles with the European Union, Canada, and Mexico, which could become more evident in subsequent quarters. A poll of economists by Reuters forecasted the trade deficit by $50.3 billion in July.
“If we see tariffs and retaliatory tariffs, it will disrupt the flows of goods and services — and you’ve seen some of that,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC.
All major U.S. indexes were mixed to start the trading session with the Nasdaq Composite posting the biggest loss at over 90 points as of 11:00 a.m. ET. The Dow Jones Industrial Average was slightly up over two points and the S&P 500 was down about 11 points.
With the latest trade deficit data, the impending North American Free Trade Agreement deals could continue to affect the markets this week. With a soft deadline last Friday, the U.S. and Canada were unable to procure a revamped NAFTA agreement.
Canada is seemingly the next shoe to drop after a deal with Mexico was agreed to last week, but U.S. President Donald Trump appears to be in no hurry with Canada, citing that there’s “no political necessity to keep Canada in the new NAFTA deal.”
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