U.S. Trade Gap Hits Seven-Month High Amid Expanding Tariff War

(Bloomberg) -- The U.S. trade deficit widened more than forecastin September to a seven-month high as imports expanded and themerchandise gap with China hit a record amid an escalatingtariff war.

The gap for goods and services increased 1.3 percent from theprior month to $54 billion, Commerce Department data showedFriday. The median estimate of economists surveyed by Bloombergcalled for a deficit of $53.6 billion. Imports and exports bothrose 1.5 percent.

The monthly report provides details around third-quarter datareleased last week that showed trade imposed the biggest drag ongrowth in 33 years amid tariffs on China and counter-levies bythe Asian nation. While President Donald Trump is threateningmore action, U.S. businesses already are facing higher pricesand supply-chain disruptions as they rush to buy materials andother items.

Overall exports rose to $212.6 billion, including gains inpetroleum products, gold, oil and aircraft. Imports increased to$266.6 billion, boosted by a range of capital and commercialgoods. The overall trade gap for goods increased to $76.3billion, also a record and in line with the preliminary figurelast week.

The unadjusted merchandise trade gap with China, the world'ssecond-biggest economy, widened to $40.2 billion from $38.6billion.

American soybean exports fell 29 percent from the prior month to$1.79 billion, the lowest since February. That extended theunwinding of a run-up in the second quarter before Chineseretaliatory levies were imposed.

Analysts are monitoring the trade data to assess whether thetariff headwinds are starting to inflict more pain on theeconomy than they anticipated. The stronger dollar also is apotential hurdle for exports of American-made goods.

An index of U.S. manufacturing fell by more than forecast to asix-month low in October as a measure of export orders declinedto the lowest since 2016, data from the Institute for SupplyManagement showed Thursday.

Gross domestic product expanded at a 3.5 percent pace in theJuly-to-September period, marking the best back-to-back quartersof growth since 2014. Net exports subtracted 1.78 percentagepoints from GDP growth, reflecting an unwinding of the boost inthe prior quarter when U.S. exporters of soybeans and otherproducts stepped up shipments to beat retaliatory tariffs fromabroad.

Other Details

• September goods trade deficits with Mexico and Canada both narrowed on an unadjusted basis; the gap with Europe shrank to $10.6 billion from $15.7 billion
• Exports and imports of goods account for about three-fourths of America's total trade; the U.S. typically runs a deficit in merchandise trade and a surplus in services

©2018 Bloomberg L.P.