Sun, Aug 05, 2018 - Page 16 News List

US trade deficit expands in June amid growing tension

AFP, WASHINGTON

The US trade deficit swelled in June by the largest amount in 19 months, reversing much of May’s trade-war driven export bonanza, even as brinkmanship between Beijing and Washington worsened.

A dip in auto exports and rising oil prices drove the increase in the gap between US imports and exports, the US Department of Commerce reported on Friday.

Bilateral US deficits widened with China, the EU, Canada and Mexico, all trading partners that have retaliated against US President Donald Trump’s multifront global trade war.

Shortly before the numbers were released, Beijing warned that it was ready to impose new tariffs on US$60 billion in US products, responding to Trump’s plans to jack up the punitive duties on the next US$200 billion in Chinese goods to be targeted.

The White House quickly fired back, calling Beijing’s latest treat of retaliation “weak.”

US National Economic Council Director Larry Kudlow warned China it “better not underestimate” Trump’s resolve in the conflict.

The US trade deficit rose 7.3 percent, or US$3.2 billion, in June to US$46.3 billion, overshooting analyst expectations in the largest jump since November 2016, department data showed.

Average prices for imported oil hit the highest level since December 2014 at US$73.60 per barrel — bringing the value of oil imports for the month to US$19.6 billion, also the highest in three-and-a-half years.

Rising oil prices also boosted the value of US crude exports, which were the highest on record at US$20.4 billion.

As the US Federal Reserve gradually tightens interest rates, the US dollar has also risen steadily since April, making US exports more expensive to foreign buyers.

The result could weigh on revised calculations of second-quarter US growth, which Trump hailed as a key achievement last week after it was reported as the strongest GDP increase in nearly four years.

In May, a rush by Chinese importers to beat Beijing’s looming counter-tariffs led to a surge in US exports of crude oil and soybeans, temporarily driving down the deficit and boosting GDP growth in the April-to-June period.

While soybean exports continued to rise in June, US shipments of automobiles, aircraft and pharmaceuticals fell.

Pantheon Macroeconomics chief economist Ian Shepherdson said that “a big decline is coming” in the third quarter, which should boost the trade gap by about US$3 billion per month.

“Exports will rise over the quarter, but strong domestic demand growth will lift imports more rapidly,” he said in a client note.

Oxford Economics Ltd said the escalating trade battle between Washington and Beijing made the future even more difficult to predict.

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