U.S Trade Deficit Higher That Analyst Predictions

How is the trade deficit impacted by import and export tariffs?


The Unites States goods and services deficit has exceeded analyst predictions in September as trade tension with China increases. For the US,  September saw record imports which is attributed to a strong dollar.

The deficit increased to a huge $54 billion for September, which is a 1.3 percent increase (equivalent to $700 million USD) from August. From September 2018 to September 2017 the goods and services deficit increased by 10.1 percent, based on government metrics given on Friday. Economists estimated an average gain of $53.6 billion, surveyed by Refinitiv.

Rising wages and a low unemployment level, US citizens have been purchasing more foreign consumer goods, according to the commerce department.

The U.S goods deficit remained still at $76.3 billion. Exports have hiked to $212.6 billion, which is up $3.1 billion from August. Imports have increased from $3.8 billion to $266.6 billion.

The Trump administration has followed through on plans to tax $200 billion worth of Chinese imports. Much of the trade-war terms are yet to be decided, many are expecting the G20 later this month to bring Trump and Chinese president Xi Jinping together to discuss further proposals.

Trump has expressed concern for trade imbalanced and has been reported saying that import tariffs will be used to offset deficits. President Trump has also said that the tariffs that the U.S imposes will help negotiate agreements that are more favorable to the U.S than the current terms are.

Since the start of 2018, the global trade deficit has jumped by $40.7 billion, this increase can be attributed to import gains. This year, imports have increased by $143.8 billion.

The trade gap should impact GDP metrics for Q3, although most estimates have already accounted for the trade war. Analysts are stating that recent tax slashes are economic stimulus are increasing demand high, so U.S imports and high, causing the trade gap to increase.

For China, the goods and services deficit has hiked to $40.2 billion, which is the highest on record. Analysts and economists are using China’s soybean trade as an indication of the trade-war’s impact on China’s economy. September exports were down $744 million from August for China.

The Shanghai Composite Index has suffered through the trade-war, dropping by 22 percent in 2018, metrics by FactSet. Although, China’s equities are normally seen as indicators for global stock markets, so a bounce-back by the Shanghai Composite may mean strong gains for global markets.

Last month China revealed their Q3 GDP statistics, which showed their economy’s growth was not as high as expectations (6.5 percent). This latest report from China is showing that the economy is growing at its slowest pace since the financial crisis.

The U.S outperformed Q3 estimates.