Overall trade deficit on track to exceed 2018 total, but China deficit narrowing
By Steven L. Byers, PhD, CPA Senior Economist
The US trade deficit in goods and services increased by 1.6 percent in August, to $54.9 billion, up $0.9 billion from $54.0 billion (revised) in July.
The August increase is due to a 1.1 percent rise in the goods deficit, to $74.4 billion, and a decrease in the services surplus by 0.12 percent, to $19.5 billion. August exports were $207.9 billion, up 0.2 percent ($0.5 billion) from July.
Simultaneously, August imports were $262.8 billion, a 0.5 percent increase from $1.3 billion in July. Over the period from January to August 2019, the US trade deficit cumulatively totals $428.7 billion, $28.3 billion larger than the same period in 2018 (a 7.1 percent increase). Exports have decreased $3.2 billion (0.2 percent), while imports have risen $25.1 billion (1.2 percent).
With respect to China, despite an overall, continuing deficit, there is some good news. The monthly goods deficit decreased $0.7 billion, to $28.9 billion in August. Exports to China increased $0.7 billion, to $10 billion, and imports decreased $0.05 billion, to $38.9 billion. Year-to-date, the goods deficit with China totals $238.4 billion, down 11.7 percent. Exports are at $74.3 billion, and imports are at $312.7 billion.
The trade deficit with Germany continues to increase, and reached $6.9 billion in August. Imports were $11.8 billion, an increase of $0.8 billion, and exports totaled $4.9 billion, an increase of $0.2 billion. Year-to-date, the trade deficit with Germany has increased 1.6 percent, to $46.6 billion. With recent European Central Bank reductions in short-term interest rates and an increase in quantitative easing, this trend is not likely to reverse itself anytime soon.
With regard to other major trading partners, year-to-date the trade deficits are: the EU is $120 billion (up 8.7 percent), Japan is $48.5 billion (up 7.0 percent), South Korea is $14.8 billion (up 32.0 percent), India is $15.2B (up 8.2 percent), Canada is $14.7 billion (up13.8 percent), and Mexico is $66.9 billion (up 30.6 percent).
The situation for US agriculture continues to be difficult to be challenging, though there is talk in Washington, DC. that the House may bring the USMCA up for a vote. If passed, it would impact parts of the agriculture sector. Exports of agricultural commodities increased $481 million over the revised July figure but have decreased on a year-to-date basis by $0.7 billion. Within the major agricultural commodities there are winners and losers. Soybean exports increased in August by $261 million, ahead of 2018 exports by $1.9 billion. Exports of wheat are up $75 million from the previous month, an increase of $816 million year-to-date in comparison to last year’s reported figures. Corn exports increased $53 million in August but are down $2.9 billion year-to-date. Exports of dairy products were up slightly ($19 million) in August, ahead of the 2018 year-to-date figure by $33 million.
For some major categories of imports, the year-to-date picture is mixed. Imports of computers are $53.6 billion (up 1.5 percent from 2018), telecommunications equipment imports are $41.0 billion (down 17.9 percent), cell phones are $74.5 billion (up 1.8 percent), automobile imports are $120.5 billion (up 4.6 percent), iron & steel imports are $11.7 billion (down 15.5 percent), and pharmaceutical preparations imports are $98.8 billion (up 12.1 percent).
After a 15-year fight over EU subsidies for Airbus, the WTO has ruled that the US could impose tariffs as retaliation for illegal aid that the 28-country EU has given to Airbus. The Trump administration plans to impose tariffs in retaliation on $7.5 billion worth of European imports—from gouda cheese to single-malt whiskey to large aircraft—beginning Oct. 18. At a time when growth in the EU is slowing, it remains to be seen how the EU will respond.