‘It is not trade that is subtracting from growth but domestic supply constraints that are holding back growth…’
(AFP) America’s politically-sensitive trade deficit jumped to a five-month high in May as imports of automobiles hit the highest on record, according to government data released Wednesday.
The trade deficit with Mexico, a country President Donald Trump threatened with stinging tariffs, rose to its highest in a decade, according to the Commerce Department report.
Financial markets in May were whipsawed by the shifting uncertainties of Trump’s trade wars, and fears of the impact of more tariffs on the US economy.
This data should prove frustrating for the president, who has made eliminating the deficit a signature goal of his administration, saying it is a sign other countries are stealing from the United States.
The US trade gap jumped 8.4 percent to $55.5 billion, seasonally adjusted, well above analyst forecasts.
That surge combined with the April trade gap, which was revised higher than originally reported, could weigh on growth forecasts for the second quarter.
May was another challenging month for global trade, as Trump threatened to stifle commerce with major partners: Trade talks with China nearly collapsed, and Trump threatened to impose duties on all Chinese imports — and on all goods from Mexico in a dispute over migrants at the southern border.
Those dangers have receded for the moment following truces with Beijing and Mexico City, but while those positive turns remained uncertain importers may have rushed in to lock in lower prices and rebuild inventories.
Imports of goods and services rose 3.3 percent to $266.2 billion in the latest month, the largest jump in more than four years as Americans bought more passenger cars, crude oil, semiconductors and consumer items, the report said.
Economists John Ryding and Conrad DeQuadros of RDQ Economics, question whether the trade will impact US growth in the April-June quarter.
“It is not trade that is subtracting from growth but domestic supply constraints that are holding back growth,” they said in an analysis. “Imports have surged over the last three months but these imports are vital for domestic production.”
At $33.2 billion, imports of autos and parts were the most on record.
US exports also rose but by a slower two percent, although consumer goods were the highest on record at $18.1 billion.
The report showed the extent to which trade relations were reorienting themselves amid Trump’s aggressive stance.
In the first five months of the year, the trade deficit has risen 6.4 percent to $261.4 billion compared to the same period in 2018. But it has fallen 10.5 percent with China, which has traditionally been the largest feeder of America’s import splurges.
The deficit with Mexico has increased 35 percent to $40.4 billion, and in May hit $9 billion, the highest since seasonally adjusted records began in 2009.
With the European Union, the US deficit was up 7.3 percent to $72.3 billion in the year-to-date.
© Agence France-Presse