U.S. Deficit Widens as Exports Fall

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The trade deficit in the U.S. widened significantly in August reaching $48.3 billion as exports fell close to a three year low.

Higher Dollar, Lower Exports

The deficit rose by over 15 percent to the highest it has been since March this year, while goods and services exports declined 2 percent, reaching $185.1 billion, a figure not seen since October three years ago. The deficit was additionally impacted by a 1.2 percent rise in imports.

The main culprit for the drop in exports is the high value of the dollar, as its increase is making it harder for U.S. products and services to compete in foreign markets. Additionally, its biggest trading partner, Canada, is currently entering a recession, while China, the world’s second largest economy which has seen rapid growth in the past, has slowed down significantly.

Many analysts and economists already share the opinion that this situation will continue until at least the end of the year with the deficit expected to rise further, impacting overall economic growth for the year.

Manufacturing and Energy Exports Down

The U.S. deficit with China increased by nearly 11 percent to $35 billion in August, the highest it has been for nearly a year, partly due to a significant increase in imports of Chinese made cellphones which are up 9.5 percent from last year. The deficit with the EU also increased 9 percent for August bringing it to $13.6 billion, while the deficit with Japan fell 9 percent to $5.2 billion.

The significant drop in exports is mostly the result of lower sales for U.S. made products such as computers, cars, and industrial machinery. Energy exports are also down, dropping by over 9 percent to $8.1 billion. At the same time, while imports of cellphones, telecommunication equipment, and food related goods went up, oil imports went down by nearly 12 percent to $15.1 billion.

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