August Trade Deficit Hits $53.2 billion; China Trade Deficit Sets Another Monthly Record

October 05, 2018

New trade data from the Department of Commerce shows that America’s trade deficit continues to rise, with the August seasonally-adjusted deficit of $53.2 billion rising 6 percent above the July figure and a staggering 20 percent worse than the August 2017 figure of $44.2 billion. On a year-to-date basis, the trade deficit is running at $391 billion, up 8.6 percent on the comparable period for 2017. 

The escalating trade deficit is driven by two main forces: US economic growth outpacing much of the rest of the world—which leads to more imports, and a rising dollar that makes US exports less competitive worldwide and enables imports to take an increased market share. 

Record new goods deficit with China

The monthly US trade deficit with China set an all-time record of $36.8 billion. Year-to-date, US exports to China are up 5 percent at $83.6 billion while imports from China are up 8 percent, continuing a familiar trend. There is some good news, however. While the year-to-date deficit with China is up 8.8 percent, America’s worldwide goods deficit is up 9.7 percent in that period. This indicates that China accounts for a slightly smaller portion of the overall goods deficit.  

China trade has been volatile this year, with many importers speeding up imports to beat the tariffs imposed by both countries. It’s likely that the deficit with China will shrink due to tariffs, which now apply to some $250 billion of US imports from China, about half of total US-China trade. 

“The growing US trade deficit points to two critical things,” said CEO of CPA Michael Stumo. “First, we must continue to limit and reduce Chinese imports until Beijing shows signs of changing their illegal and unethical trading practices. Second, we need to take action to reduce the value of the US dollar. It has risen 7 percent so far this year above an already overvalued level. This makes our industrial and agricultural goods less competitive on world markets.”

On a bilateral basis, America’s largest deficit after China was with Mexico at $8.7 billion, a 6 percent increase over August 2017. Bilateral deficits with both Canada and Mexico worsened in August and for the year as a whole—likely reflecting importers rushing to bring in products ahead of a new trade agreement that could make it harder or more expensive to import goods (especially those containing components made outside North America).

The US goods deficit with Japan came in at $6.0 billion, better than the 2017 August figure of $6.6 billion. However America’s deficit with Germany increased to $5.9 billion—7 percent worse than the 2017 figure. 

Auto and tech sectors show increasing deficits

America’s goods deficit year-to-date is $573.9 billion, 8.4 percent worse than the corresponding period a year ago. And where last year’s total goods deficit was $807 billion, the US appears headed toward an $875 billion goods deficit in 2018. The non-petroleum goods deficit is even worse—10 percent worse than a year ago. The US continues to be a net importer of petroleum products (at $43 billion so far this year), so the overall non-petroleum deficit will not be as large as the total, but the trend is not good. 

The US automotive deficit came in at $18.3 billion in August, worse than July’s $17.6 billion. The advanced technology products deficit came in at $12.4 billion, slightly better than July’s $13.2 billion. But for the year-to-date period, America’s advanced technology deficit of $80 billion is a staggering 33 percent worse than the year-ago period. As usual, that deficit is driven by technology products and trade with China.

“The large and growing trade deficit with certain large nations and in many key industrial sectors weakens our industrial base, costs us millions of jobs, and hurts our farmers,” said CPA Research Director Jeff Ferry. “The Trump administration is doing the right thing in working to fix our worldwide trading relationships, and I would add that it is winning growing support from industry and other political figures as more people realize how awful our trade position has been for the US economy—and see the shockingly unethical behavior of certain of our trading counterparties.”

Showing 4 reactions

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  • Jarrell Jackman
    Mr. Crawford is correct in saying that leadership matters and then talks of the failures of our “egomaniacal” president. Can’t imagine where would be today if the person he ran against were president.
  • James Crawford
    I agree Henry, the 2016 election was about trade both directly through its negative impact on manufacturing jobs and disgust with the constant drumbeat extolling the virtues of Free Trade. And it was an issue embraced by both Bernie Sanders and Trump.

    But it is not the case that the Trump Administration would like to engage the legislature but is unable to find the means to do so. The Trump Administration has simply not even tried.

    I had an opportunity to bring the issue up with Navarro at the beginning of this Administration. I found him to be the most open minded person in the room. The rest of the CPAs team of disgruntled macroeconomists could not have been more dismissive.
  • Henry Stowe
    Trump doesn’t have a congress to work with. The Republicans are largely freeeeeeeee trade, though that is changing a little. The Democrats are less so, but are focused on stupid Russia investigations and this just finished Kavanaugh crap. Lighthizer, Navarro, and Ross are a great team and Trump is doing the best he can. I’m not Trump psychophant, but there is tremendous opposition there. That’s why Rs and Ds were so opposed to his election. Make no mistake. 2016 was our election. It was about trade. So is 2018.
  • James Crawford
    The Trump Administration is putting up a good fight, and that’s great. But it is evidently winning all the battles and still losing the war, both internationally and domestically.

    Domestically the Administration has failed to engage the legislature and the American people, which it could do by pursuing industry / geographically specific industrial policies.

    This is the result of having an egomaniacal President and an equally narrow minded critical perspective – unable to move beyond macroeconomics, unwilling to reconceptualize the “global” economy, and endlessly blaming everyone else for our problems,