US trade deficit hits nearly 2-year low in June; China gap plunges
[WASHINGTON] The US trade deficit narrowed in June on a sharp drop in consumer goods imports, and the trade gap with China shrank to its lowest in more than 21 years, the latest evidence of the imprint on global commerce President Donald Trump is making with sweeping tariffs on imported goods.
The overall trade gap narrowed 16 per cent in June to US$60.2 billion, the Commerce Department’s Bureau of Economic Analysis said on Tuesday (Aug 5). Days after reporting that the goods trade deficit tumbled 10.8 per cent to its lowest since September 2023, the government said that the full deficit including services also was its narrowest since then.
Exports of goods and services totalled US$277.3 billion, down from more than US$278 billion in May, while total imports were US$337.5 billion, down from US$350.3 billion.
The diminished trade deficit contributed heavily to the rebound in US gross domestic product during the second quarter, reported last week, reversing a drag in the first quarter when imports had surged as consumers and businesses front-loaded purchases to beat the imposition of Trump’s tariffs.
The economy in Q2 expanded at a 3 per cent annualised rate after contracting at a 0.5 per cent rate in the first three months of the year, but the headline figure masked underlying indications that activity was weakening.
Last week Trump, ahead of a self-imposed deadline of Aug 1, issued a barrage of notices informing scores of trading partners of higher import taxes set to be imposed on their goods exports to the US.
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With tariff rates ranging from 10 to 41 per cent on imports to the US set to kick in on Aug 7, the Budget Lab at Yale now estimates the average overall US tariff rate has shot up to 18.3 per cent, the highest since 1934, from between 2 per cent and 3 per cent before Trump returned to the White House in January.
A centrepiece of Tuesday’s report was the latest steep drop in the US trade deficit with China, which tumbled by roughly a third to US$9.5 billion in June to its narrowest since February 2004. Over five consecutive months of declines, it has narrowed by US$22.2 billion – a 70 per cent reduction.
US and China trade negotiators met last week in Sweden in the latest round of engagement over the trade war that has intensified since Trump’s return. The US currently imposes a 30 per cent tariff on most Chinese imports, which has fuelled a steep drop off in inbound goods traffic from China. Imports from China dropped to US$18.9 billion, the lowest since 2009.
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The trade negotiators have recommended that Trump extend an Aug 12 deadline for the current tariff rate to expire and snap back to more than 100 per cent, where it had briefly been earlier this year after a round of tit-for-tat increases by both sides.
“We’re getting very close to a deal,” Trump said on Tuesday in an interview on CNBC. “We’re getting along with China very well.” REUTERS
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