U.S. Trade Deficit Rises as Policy, Weather Cloud Future
U.S. Trade Deficit Rises as Policy, Weather Cloud FutureThe U.S. trade deficit has ballooned, but its path forward is uncertain.
Combined increases in U.S. exports and imports have inflated America’s trade deficit by $27.9 billion over the year – a hike of 9.6 percent that brought the U.S. commerce shortfall to $43.7 billion in July.
Exports through the first seven months of the year were up 6 percent from the same window in 2016, climbing to nearly $77 billion. Imports, meanwhile, reached nearly $105 billion and enjoyed a 6.7 percent bump on the year, according to a report published Wednesday by the Census Bureau.
“U.S. exporters have been aided by stronger global growth around the world and a weaker U.S. dollar,” Sam Bullard, a managing director and senior economist at Wells Fargo Securities, wrote in a research note Sunday. “The healthy growth in real exports this year led net exports to contribute positively to real [gross domestic product] growth in both the first and second quarter.”
Indeed, the overall deficit increase was less about export weakness than it was about steady growth in Americans’ own personal spending through the first several months of the year – a positive development for the U.S. economy that likely led to more imports being purchased.
Yet President Donald Trump’s administration has placed a heavy emphasis on reining in America’s trade deficits, so Wednesday’s report is unlikely to sit well with an administration that has seen the country’s overall trade gap climb by nearly 10 percent under its watch.
And where America’s trade numbers go from here is uncertain, as weather-related transportation complications threaten to derail imports and exports that have climbed considerably through the first few months of the year
“Clearly, trade will be one of the major economic indicators that will be impacted by the negative effects of Hurricane Harvey over the coming months,” Bullard said. “While appearing to be reopening more quickly than was seen with the Port of New Orleans during Hurricane Katrina, the Port of Houston is one of the busiest ports of trade in the U.S.”
Trade also stands to suffer at the hands of potential policy decisions – namely, whether the U.S. withdraws from the North American Free Trade Agreement. That possibility has been floated by Trump in recent weeks, with the president saying he would “probably” need to pull the U.S. away from the two-decades-old agreement at some point.
Trade representatives from the U.S., Mexico and Canada on Tuesday wrapped up a second round of negotiations aimed at retooling the accord. They issued a statement after discussions concluded in which they hailed “important progress” that was reached “in many disciplines.” But the specific details of what they discussed and what the final trade agreement will look like – and whether the U.S. will be part of that finished product at all – remain to be seen.
Trade also could be shaken if Trump follows through on a threat – though one that’s likely far-fetched – to cut off trade with countries that do business with North Korea, as Pyongyang continues to test missiles and its nuclear capabilities and to engage in a war of words with the U.S. president.
Mexico, China and Russia would be among the key international countries that would be impacted by such a decision. China would be particularly hard-hit, as the U.S. is the top buyer of Chinese products internationally and Beijing’s banks largely depend on access to American financial institutions.
With the possibility of trade restrictions, combined with the havoc Hurricane Harveyalready has wreaked – and the additional damage Hurricane Irma may do – trade flows could look a lot different through the final five months of the year than they did through the first seven.