The US trade deficit rose to US$67 billion ($101.7b) in August as the world's largest economy recovered from the shock of the pandemic, undercutting President Donald Trump's hopes of campaigning for re-election on slashing the gap between America's imports and exports.
The monthly figure was the widest in 14 years, according to data released by the US Census Bureau on Tuesday, as imports rose 3.2 per cent while exports increased 2.2 per cent.
The trade data were the last before the US presidential election, and showed that demand for foreign goods from American consumers and businesses was bouncing back more rapidly than America's export machine.
Throughout his time at the White House, Trump has vowed to sharply cut the US trade deficit, engaging in a series of economic conflicts with America's allies and its strategic competitors — including introducing billions of dollars of tariffs and making blustery threats of more to come — that clouded the global outlook even before the pandemic hit.
But Tuesday's data showed that in macroeconomic terms Trump's trade strategy did not yield the results he was looking for. In terms of goods alone, the US in August recorded a trade gap of US$26.4b with China, US$15.7b with the EU and US$12.5b with Mexico — the three main trading partners with which Trump has repeatedly clashed on the issue throughout his presidency. For the year to the end of August, the trade deficit was 5.7 per cent higher than it was in 2019.
"America's trade war with the world limited the trade deficit red ink for a time but it now looks like the terms of trade are changing back despite the tariffs and sanctions and the country will likely remain dependent on foreign goods for years to come, no matter who is president," said Chris Rupkey, chief financial economist at MUFG.
James Watson, senior US economist at Oxford Economics, said: "Trade is recovering, but very unevenly. Exports lag well behind imports, and trade in services is suffering far worse than trade in goods."
The 2020 election campaign has been far less driven by clashes over trade than the presidential race four years ago, as Trump's handling of coronavirus and the recession triggered by the virus have dominated the race.
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Trump had hoped that his "phase one" agreement with China, which was signed in January and halted new tariff increases in exchange for large-scale Chinese purchases of US goods, would prove that he had confronted unfair trade practices by Beijing more successfully than his predecessors.
However, China's purchases of American goods, including agricultural products, have fallen short of expectations under the deal, as bilateral tensions continued to flare because of the pandemic.
Joe Biden, Trump's Democratic challenger for the White House, has not emphasised the need to reduce America's trade deficit as much as the incumbent president, but has campaigned on plans to direct US government procurement towards American suppliers, cutting out global supply chains.
Written by: James Politi
© Financial Times