US Trade Gap Widens in First Months of 2018

Randal Sanchez
April 6, 2018

As a result, the trade surplus with the United States shrank to $2.58 billion from $2.93 billion in January.

The US trade deficit has stretched to its widest point in nearly a decade despite President Trump's attempts to eliminate it with an "America First" strategy.

The US Bureau of Economic Analysis said a $1.1 billion rise in service imports "reflects payments for the rights to broadcast the 2018 Winter Olympic Games" after NBC, the Comcast-owned television network, paid nearly $1 billion to air live coverage of the contest from Pyeongchang, South Korea. It was the sixth straight month with a wider deficit, the longest streak since 2000.

The Canadian dollar was steady against its USA counterpart on Thursday, holding near an earlier five-week high even as the greenback broadly climbed and data showed a widening of Canada's trade deficit. Part of the rise in the trade deficit in February reflected commodity price increases.

Year-to-date, the goods and services deficit increased $21.1 billion, or 22.7 percent, from the same period in 2017.

The goods deficit with Mexico jumped by $1 billion to $6.6 billion while it rose with Europe by $300 million to $15.3 billion.

The Trump administration on Tuesday targeted 25 percent tariffs on some 1,300 Chinese industrial technology, transport and medical products, to force changes in Beijing´s intellectual property practices.

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Exports also rose 1.7%, reaching $204.4bn over the month, driven by sales of oil and natural gas and automotive vehicles. At the same time, his tariffs on some imported steel and aluminium, along with proposed taxes by U.S. and China on goods from each country, represent a wild card for the outlook and have sparked financial-market swings in recent weeks.

While these actions may prove politically popular with Trump´s working class political base, especially in states hard-hit by factory closures and import competition, analysts warn they could undercut economic growth and raise prices for both consumers and producers.

Figures show that while the USA exported goods and services worth $204.4 billion, it imported $262 billion's worth.

However, the value of imports also increased by 1.7% to USD262.0 billion due to the royalty payment for the Olympics as well as higher imports of capital goods, industrial supplies and materials, and foods, feeds, and beverages. "In 2019, the tax legislation and budget deal will boost the federal deficit by $480 billion, boosting the trade deficit by $161 billion". "U.S. financial markets were little moved by data".

The Commerce Department said the trade deficit widened to USD57.6 billion in February from a revised USD56.7 billion in January. This suggests trade would subtract from first-quarter gross domestic product.

The central bank has raised its benchmark interest rate three times since July to 1.25 percent but has anxious about a number of uncertainties, including the impact of past rate hikes on highly indebted Canadians and the outlook for trade. The trade deficit in goods with China narrowed in February to $29.3 billion from $36 billion in January.

Exports to China were unchanged in February.

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