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Falling car exports help nudge July US trade gap higher

[WASHINGTON] The US trade gap rose in July mostly due to weaker exports of cars and consumer goods like mobile telephones, the Commerce Department reported Wednesday.

The July trade deficit saw its largest swing in three months, marking a modest start at the beginning of the third quarter.

Imports also fell, however, as the weak US dollar pushed up prices for foreign goods and services.

President Donald Trump has made reducing bilateral trade deficits a cornerstone of a his economic agenda, with negotiations currently underway to revise the North American and US-Korea Free Trade Agreements.

The July trade deficit rose 0.3 per cent to US$43.7 billion, eroding some of the ground gained in May and June, according to the Commerce Department. But it was still less than the US$44.6 billion analysts had been expecting.

Imports fell US$400 million to US$238.1 billion but exports fell faster, sinking US$600 million to US$194.4 billion.

For the year-to-date, the trade gap has risen US$27.9 billion compared to the same period of 2016 to US$319 billion.

Analysts said Wednesday that, while July's result was an increase in the deficit, it was still better than expected. As a result, third-quarter growth could be higher than previously forecast, depending on the economic damage wrought by Hurricane Harvey.

"If sustained in August/September, the July level would result in net exports adding close to 0.5 points the real GDP growth rate in the third quarter," said Jim O'Sullivan of High Frequency Economics.

In the all-important goods sector, the July US deficit was also the smallest since December at US$65 billion.

But exports of passenger cars fell by US$1 billion, while mobile telephones and similar household goods fell US$500 million for the month.

At the same time, US imports of services and capital goods were the highest on record at US$44.1 billion and US$54.1 billion, respectively. And at US$10.2 billion, US petroleum exports were at their highest in nearly three years.

Among the major trading partners, the US deficit in goods with China widened to its largest point since August of last year, at US$33.6 billion, not seasonally adjusted.

The gap in trade in goods with Canada jumped to nearly US$1 billion, even though imports from the northern neighbor fell to their lowest level in a year at US$22.9 billion, on a drop in exports, largely of autos.

The goods deficit with Mexico fell 17 per cent for the month to US$4.9 billion, while the goods deficit with South Korea rose four per cent to US$1.9 billion.

Meanwhile, the US goods surplus with the South and Central American region rose to its highest level since March of last year at US$3.1 billion.