Trade Deficit Falls 2.5% In June, But Summer Started With Third Highest Monthly Deficit This Year

The U.S. goods and services deficit fell 2.5% in June to $73.1 billion, but that was still the third highest monthly deficit number this year, according to the Bureau of Economic Analysis on Tuesday.

The trend  was the same for goods-only, with the June deficit at $97.35 billion. That was lower than the $99.84 billion in May and the $99.27 billion in April but still the third highest gap on the year.  It is unclear if there is an economic trend to watch for in terms of forecasting a recession. The goods deficit on the half-year ending June 30 is $574.19 billion, which beats the $540.83 billion in the same period last year.  If the U.S. continues to produce a monthly goods deficit of more than $90 billion each month, the 2024 trade gap in goods will be $1.11 trillion.  The U.S. has had a trillion dollar-plus year-ending trade deficit with the world for the last four years straight.

The June figures show trade surpluses, in billions of dollars, with the Netherlands ($4.8), South and Central America ($3.6), Hong Kong ($2.1), Australia ($1.9), United Kingdom ($0.9), Brazil ($0.8), Belgium ($0.7), and Saudi Arabia ($0.1).

Trade deficits were recorded, in billions of dollars, with the usual suspects and in the usual order: China ($22.7), European Union ($18.0), Mexico ($13.7), Vietnam ($10.9), Germany ($7.4), Taiwan ($6.4), Ireland ($5.8), South Korea ($5.7), Japan ($4.9), Canada ($4.6), India ($3.7), Italy ($3.1), Switzerland ($2.9), Malaysia ($1.8), France ($1.3), Israel ($0.9), and Singapore ($0.4).

The deficit with China decreased to $22.79 billion in June from $23.97 billion in May. The Vietnam deficit remains steady at $10.5 billion, not much different than the $10.42 billion in May. Mexico also saw a decline in June to $14.55 billion from May’s $14.79 billion trade deficit. No country had any noteworthy increases in their trade deficit with the U.S., owing to the overall decline in trade in June.

Despite this decline, the U.S. has spent $1.35 trillion on imported manufactured goods as of June 30, up from $1.31 trillion in the same period last year. Much of this could be due to inflation and not increased purchase volume.

Of interest, the U.S. is increasingly becoming a net food importer. Despite opening markets around the world for agriculture, including new free trade agreements, the U.S. has an overall agricultural deficit. The worst of it is in animal proteins, livestock, and seafood.

For manufactured goods, the top deficit producing products remained the same in June.

The pharmaceuticals and automotive sectors continue to be two of our biggest sources of the goods deficit. Semiconductors, which are benefiting from the CHIPS Act law and are usually a surplus trade item, were in deficit in June.

The U.S. exported $5.35 billion worth of semiconductors in June and imported $7.38 billion. The U.S. has a roughly $9 billion chips trade deficit so far this year.