Our Trade Deficit With China is Still Growing

Written by SK Ashby

Our overall trade deficit with the rest of the world shrank slightly in July according to the Commerce Department, but the trade deficit that matters the most -- the one that Trump spends all his time ranting about -- is still climbing.

Our trade deficit with China climbed by nearly 10 percent in July because imports are still rising while exports are falling.

The Commerce Department said the trade deficit dropped 2.7% to $54.0 billion as exports rebounded and imports fell. Data for June was revised down to show the trade gap shrinking to $55.5 billion instead of the previously reported $55.2 billion. [...]

The politically sensitive goods trade deficit with China increased 9.4% to $32.8 billion, with imports jumping 6.4%. Exports to China fell 3.3% in July. The goods trade deficit with the European Union jumped to a record high, with the shortfall with Germany the largest since August 2015.

The large disparity during the month of July is being partially attributed to American companies stocking up on goods before Trump's next tariffs hit the books.

It's ironic that each of Trump's threats and attacks on Chinese goods have only increased purchases of Chinese goods, isn't it? There's always another round of tariffs coming which means there's always a reason to import more goods than one normally would. We should expect to see that American firms made a similar run on Chinese goods near the tail end of August when the numbers are available.

Trump just imposed more tariffs on Chinese goods and China just imposed retaliatory tariffs on American goods, so there's obviously no reason to think things are going to change anytime soon.

I don't have data in front of me to support this, but I think the overall trade deficit probably did not shrink during the month of July by as much as these initial estimates tell us. The Commerce Department has also revised numbers from June which show the trade deficit was larger than they initially reported.

It's exceedingly rare for economic reports released during Trump's time in office to revised in a positive manner. The revisions are almost always negative. I guess you could call that a data point that I do have in front of me. It's been our experience.