Washington (AFP) – The US trade deficit expanded more than expected in July to its widest in four months, government data showed Thursday, on a surge in imports before a fresh wave of President Donald Trump’s tariffs kicked in. The overall US trade deficit jumped 32.5 percent to $78.3 billion in July, the Department of Commerce said. This came on the back of a 5.9-percent rise in imports to $358.8 billion, while exports edged up just 0.3 percent to $280.5 billion.
“While imports bounced back in July, more than half of the increase was due to gold as trade policy and safe-haven demand brought about a resurgence in trade,” said Matthew Martin, senior economist at Oxford Economics, in a statement. “Excluding gold, imports rose by a more modest 3.3 percent, while exports fell 0.1 percent,” Martin added.
Analysts at Pantheon Macroeconomics expected a growing trade gap in connection with “another wave of pre-tariff stockpiling,” they said in a recent report. Trump slapped a 10-percent tariff on almost all US trading partners in April, but twice postponed a plan for these duties to rise to varying higher levels for dozens of economies. The steeper levels, hitting key partners like the European Union, Japan, and India, finally took effect in early August.
Even so, analysts believe businesses that boosted imports to get ahead of tariff hikes are running down on existing inventory, meaning that they will likely have to make new purchases at higher business costs. For now, the impact of Trump’s tariffs on US inflation appears limited. A Briefing.com consensus forecast had expected a smaller deficit figure of $64.2 billion. Demand for capital goods linked to artificial intelligence and data centers is boosting imports, Martin said in a note.
Among sectors, imports of industrial supplies and consumer goods both jumped, the Commerce Department report said. The US goods deficit with China widened $5.3 billion to $14.7 billion in July, the report added. “Unsurprisingly, given the level of tariffs, China has been the hardest hit of all trading partners,” Martin said. Goods from the world’s second biggest economy face an additional 30-percent tariff this year, with several other Asian economies seeing lower levels.
Trump’s tariffs have roiled supply chains this year, with imports already surging in March ahead of the US leader’s wide-ranging global duties in April. Apart from varied tariff rates on different economies, Trump has slapped separate sector-specific levies on steel, aluminum, and autos — while promising more to come.
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