Trade deficit widens amid Trump tariff war

Sept. 5 (UPI) -- The U.S. trade deficit widened to $72.2 billion in July as demand for imports drastically outpaced exports. That's the highest deficit since February and the largest monthly increase since 2015.

President Donald Trump has made reducing the trade deficit a high priority. The latest numbers show the opposite could be happening as countries reduce U.S. exports, possibly in retaliation for Trump's trade policies, said Robert Brusca, a chief economist at FAO Economics.

U.S. businesses and consumers spent $212.2 billion on imported goods in July, up $1.8 billion from the month before, according to a report by The U.S. Census Bureau.

Exports declined in July to $140 billion, down $2.5 billion from June.

Specifically, shipments of soybeans declined after China imposed tariffs on them and other U.S. goods. That was done in retaliation for Trump's tariffs on Chinese products.

Economists predict that the trade deficit will widen in the coming months as a stronger dollar makes U.S. goods less competitive.

"The difference in growth between the U.S. and other countries seems to be amplified partly by the expansionary fiscal policy in the U.S.," Aichi Amemiya, a senior economist at Nomura, told the Wall Street Journal. "Ironically, that is a negative to the trade deficit."

Net foreign trade contributed 1.2 percent to the GDP in the second quarter, but Ian Sheperdson, chief economist at Pantheon Macroeconomics, expects those gains to be lost in the third quarter.

"The strength of domestic demand is pulling in imports, while the rate of growth of exports is slowing from its unsustainable spring pace," Sheperdson told the Journal.

Economists differ from Trump on whether a trade deficit is good for the country. Trump has said that "deficits hurt the economy very badly." But the fiscal stimulus package passed by Congress last year empowered U.S. consumers to buy more in the spring, leading to more imports.

Economists point out that trade deficits are nothing new and it's been this way for decades.