Tuesday, 22 January, 2019

US Trade Gap Widens in First Months of 2018

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Ginger Lawrence | 06 April, 2018, 07:00

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 today.

The report also showed the merchandise-trade gap with China, the world's second-biggest economy, narrowed to $34.7 billion in February from $35.5 billion.

It's important to note, however, that those figures only include trade in goods.

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 two nations, along with Mexico, are racing to wrap up negotiations to revamp the North American Free Trade Agreement by month's end, before upcoming United States and Mexican elections. The deficit with Mexico surged 46.6 percent in February.

Imports were up by 1.9 per cent, while exports rose by just 0.4 per cent.

He has also slapped 25 percent import duties on steel and 10 percent on aluminum.

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While President Donald Trump has vowed to shrink the trade deficit, it may keep growing thanks to rising household spending, strong business investment and tax cuts that are boosting demand for imports.

"By our calculations, the tax legislation and two-year budget deal will add $205 billion to the federal budget deficit this year, which increases the nominal trade deficit by $75 billion", said Ryan Sweet, an economist at Moody´s Analytics in West Chester, Pennsylvania.

Still, the loonie has been boosted this week by optimism on a deal to revamp the North American Free Trade Agreement. "U.S. financial markets were little moved by data". Still, the so-called real trade deficit is above the fourth-quarter average of $66.81 billion.

The central bank has raised its benchmark interest rate three times since July to 1.25 percent but has anxious about a number of uncertainties, including the impact of past rate hikes on highly indebted Canadians and the outlook for trade. Exports of aircraft and other transportation equipment rocketed 19.6 percent.

Exports grew by 0.4 per cent as shipments of passenger cars and light trucks rebounded following the auto plant closures in January.

Exports to China were unchanged in February. Exports increased $22.4 billion or 5.9 percent.