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US trade gap hits seven-month high amid expanding tariff war

[WASHINGTON] The US trade deficit widened more than forecast in September to a seven-month high as imports expanded and the merchandise gap with China hit a record amid an escalating tariff war.

The gap for goods and services increased 1.3 per cent from the prior month to US$54 billion, Commerce Department data showed Friday.

The median estimate of economists surveyed by Bloomberg called for a deficit of US$53.6 billion. Imports and exports both rose 1.5 per cent.

The monthly report provides details around third-quarter data released last week that showed trade imposed the biggest drag on growth in 33 years amid tariffs on China and counter-levies by the Asian nation.

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While President Donald Trump is threatening more action, US businesses already are facing higher prices and supply-chain disruptions as they rush to buy materials and other items.

Overall exports rose to US$212.6 billion, including gains in petroleum products, gold, oil and aircraft. Imports increased to US$266.6 billion, boosted by a range of capital and commercial goods.

The overall trade gap for goods increased to US$76.3 billion, also a record and in line with the preliminary figure last week.

The unadjusted merchandise trade gap with China, the world's second-biggest economy, widened to US$40.2 billion from US$38.6 billion.

American soybean exports fell 29 per cent from the prior month to US$1.79 billion, the lowest since February. That extended the unwinding of a run-up in the second quarter before Chinese retaliatory levies were imposed.

Analysts are monitoring the trade data to assess whether the tariff headwinds are starting to inflict more pain on the economy than they anticipated.

The stronger US dollar also is a potential hurdle for exports of American-made goods.

An index of US manufacturing fell by more than forecast to a six-month low in October as a measure of export orders declined to the lowest since 2016, data from the Institute for Supply Management showed Thursday.

Gross domestic product expanded at a 3.5 per cent pace in the July-to-September period, marking the best back-to-back quarters of growth since 2014.

Net exports subtracted 1.78 percentage points from GDP growth, reflecting an unwinding of the boost in the prior quarter when US exporters of soybeans and other products stepped up shipments to beat retaliatory tariffs from abroad.

Other Details

September goods trade deficits with Mexico and Canada both narrowed on an unadjusted basis; the gap with Europe shrank to US$10.6 billion from US$15.7 billion.

Exports and imports of goods account for about three-fourths of America's total trade; the US typically runs a deficit in merchandise trade and a surplus in services.

BLOOMBERG