U.S. trade deficit widens as exports sag, imports from China surge

Tue Oct 6, 2015 11:21am EDT
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By Jason Lange

WASHINGTON (Reuters) - U.S. exports took a hit from an ailing global economy in August and imports from China surged, fueling the largest expansion of America's trade deficit in five months.

The data released on Tuesday by the Commerce Department illustrates the U.S. economy's vulnerabilities to a strong dollar and weak demand in foreign markets, which could impose further caution on the Federal Reserve's plans to hike interest rates.

The trade deficit swelled by 15.6 percent to $48.3 billion in August, according to data that is adjusted for seasonal factors.

The scope of the increase was accentuated by the unusually narrow trade deficit registered in July. Also, imports likely got a temporary boost from inflows of cellphones ahead of the release of Apple's new iPhone model.

But the size of the trade gap has risen far above the average levels seen in recent years and the onus for stronger U.S. economic growth is now falling squarely on consumers.

"Trade will remain a drag on the real economy until well into next year," said Steve Murphy, an economist at Capital Economics.

Sales of U.S. goods and services abroad fell 2 percent to their lowest level since October 2012. Exports to Mexico fell by $1.5 billion in August and the European Union bought $500 million less from America than it did in July, according to data on bilateral trade which is not seasonally adjusted.

The declines are partly due to expectations of higher interest rates in the United States that have pushed the value of the dollar higher, reflecting the strength of America's economy relative to its trading partners. A stronger dollar makes U.S. goods less competitive abroad.   Continued...

A cargo ship sits at the dock at a port of Miami, October 4, 2007.  REUTERS/Carlos Barria