Washington (AFP) – The US trade deficit widened in February for the sixth straight month, hitting a fresh nine-and-a-half-year record even though US exports were at an all-time high, official data showed Thursday.
The broadening gap comes as President Donald Trump pursues an increasingly fraught battle with the world’s largest economies to right the yawning US trade imbalance, sparking fears of a trade war.
Soaring US imports of industrial supplies and capital goods pushed the monthly US trade deficit up 1.6 percent to $57.6 billion, seasonally adjusted, the highest level since October 2008.
The February result overshot the expectations of economists, who were calling for the trade deficit to hold steady at January’s level, previously the highest since October 2008.
The rising trade gap was also due to weigh heavily on growth at the start of the year because deficits subtract from calculations of GDP. Citing the underperformance on trade, IHS Market lowered its first-quarter estimate for GDP growth a tenth of a point to 1.5 percent.
A decade of steady job growth and rising incomes has driven stiff demand among consumers and industry in the world’s largest economy.
The US is already on track to surpass 2017’s deficit, the highest since the financial meltdown of 2008 — testing Trump’s vow to rein in the trade gap, which he sees as a job killer but economists view as a symptom of growth.
“The US continues to expand faster than most other industrialized countries, so it should not surprise anyone that the trade deficit is worsening,” economist Joel Naroff said in a client note.
– A month of records –
“Tariffs may sound like a good way to change the pattern of trade, but they tend to raise prices” without changing fundamental drivers of trade, he added.
Tit-for-tat exchanges of tariff threats from Washington and Beijing have whipsawed global stock markets this week, prompting the Trump administration to call for calm and point to negotiations as a likely course of action.
Washington and Beijing have threatened in recent days to put import duties on about $50 billion of each other’s exports — with the Chinese targeting politically sensitive US goods such as soybeans and the Americans pointing to high-end manufactured items in the aerospace, auto, pharmaceutical and other sectors.
The US imports from China about four times as much as it sells to that country in goods as services, leaving Washington more room than Beijing to tax a greater share of bilateral trade.
But February’s figures showed the US bilateral deficit in goods trade with China — America’s largest and the focus of much of Trump’s ire — narrowed 2.5 percent to $34.7 billion. Trump is seeking to cut the annual US deficit with China by $100 billion.
The goods deficit with Mexico jumped by $1 billion to $6.6 billion while it rose with Europe by $300 million to $15.3 billion.
Overall, February exports of US goods and services rose 1.7 percent to their highest on record at $204.4 billion. But so did imports, which likewise gained 1.7 percent to reach $262 billion — also an all-time record.
Elsewhere, the February numbers were replete with more records: US exports of autos, parts and engines were the highest on record at $14.8 billion for the month.
But the US goods deficit was still at its highest level since July 2008 at $76 billion — with capital goods imports at an all-time high of $57.8 billion.
Wall Street took the news in stride, with investors calmed by hope a trade war will be averted. The blue-chip Dow Jones Industrial Average was up 1.3 percent toward 1600 GMT.