U.S. Trade Deficit Jumps in August

Alan Tonelson |

The U.S. goods and services trade deficit rebounded by 15.60 percent in August as the effects of the strong dollar helped both reduce American exports and increase the nation's imports. U.S. deficits with China and in manufacturing remained at historically lofty levels and exports continued weakening. Moreover, right on the heels of news that President Obama's Pacific rim trade deal is now completed, the August trade figures signaled that agreements like this and related policy decisions will continue holding back the weak U.S. recovery to the tune of hundreds of billions of dollars since it began six years ago.

Here are selected highlights of the latest monthly (July) trade balance figures released this morning by the Census Bureau:

  • The day after President Obama and other leaders announced completion of a Trans-Pacific Partnership (TPP) trade deal, new figures showed that the U.S. goods and services trade deficit in August surged 15.60 percent sequentially to its highest monthly level since March, when the fallout from West Coast ports labor conflicts distorted U.S. trade flows.
  • The combined August shortfall of $48.33 billion has been exceeded this year only by March's $52.16 billion, and was much greater than July's downwardly revised $41.81 billion – 2015's second lowest monthly total.
  • As widely expected, sluggish global growth and a strong dollar weakened U.S. exports, which fell by 1.97 percent, to $185.09 billion, in August from July's upwardly revised $188.81 billion. But U.S. goods and services imports increased by 1.22 percent on month, from an upwardly revised $230.62 billion to $233.42 billion.
  • America's trade performance in manufacturing and with China both significantly propped up the August deficit. The August manufacturing shortfall of $73.04 billion was the second highest monthly figure ever, topped only by July's $73.58 billion.
  • U.S. manufacturing exports rose in August by 0.77 percent, from $92.36 billion to $93.07 billion, but the much larger amount of manufactures imports also edged up – by 0.10 percent, from $165.94 billion to $166.10 billion.
  • Year-on-year, the 2015 manufacturing trade deficit of $539.65 billion is running 15.80 percent ahead of last year's record total – which represented the sector's second straight all-time annual high.
  • Since August, 2014, manufacturing exports are down 5.61 percent but imports are up 2.31 percent.
  • America's manufactures'-dominated trade with China deteriorated sharply in August, too, as the chronic goods deficit rose by 10.68 percent to $34.95 billion, the second highest monthly total on record.
  • U.S. merchandise exports to China fell for the second straight month – by 3.52 percent, to $9.17 billion. Goods imports rose by 7.40 percent over July's figure, to $44.12 billion.
  • Year-to-date, the U.S. merchandise deficit with China is running 9.50 percent ahead of last year's latest annual record. And despite China's continued, if slower, growth, U.S. goods exports to the People's Republic are down 3.72 year-to-date.
  • The August trade figures also boosted the odds that U.S. trade flows will continue dragging on a U.S. recovery whose growth has already been historically weak. The latest second quarter GDP figures, released September 25, made clear that since the end of the last recession, in the second quarter of 2009, the growth of the inflation-adjusted goods and services trade deficit has cut cumulative real recovery growth by 8.51 percent, or $168.3 billion.
  • Much greater has been the recovery toll exacted by that portion of the trade deficit most heavily influenced by trade deals like the TPP and other trade policy decisions. Since the end of the last recession, the increase in this real non-oil goods trade deficit has slashed cumulative growth by nearly $397 billion, a more than 20 percent loss.
  • The initial third quarter GDP figures will not be released until later this month, but the higher current dollar trade deficit just reported for August, along with a 4.47 percent increase in this shortfall's three-month moving average, indicate that the overall trade gap is still sapping the recovery's strength.
  • More important, given Congress upcoming consideration of the TPP, the new trade figures show that the August after-inflation non-oil goods deficit of $60.37 billion was the second highest monthly total on record as well. As a result, this shortfall is likely to hit a new record for the third quarter and thus push still higher the growth cost of U.S. trade agreements and similar measures.
  • On a pre-inflation basis, the August figures boosted the year-to-date combined trade deficit to $354.42 billion – 5.23 percent higher than last year's total. Goods and services year-to-date are down 3.78 percent, but imports are off by only 2.18 percent.

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