U.S. Trade Gap Widens by More Than Forecast to Highest in 2019

(Bloomberg) --

The U.S. trade deficit widened by more than forecast to a five-month high as imports surged the most since 2015, illustrating how President Donald Trump’s trade policies are weighing on the economy.

The gap increased 8.4% in May to $55.5 billion and April’s level was bigger than previously reported, Commerce Department data showed Wednesday. The median estimate of economists surveyed by Bloomberg called for a deficit of $54 billion. Imports jumped 3.3% and exports rose 2%, the most in a year, while the goods- trade gap with China widened to $30.1 billion.

The report suggests net exports were on track to drag down the pace of expansion in the second quarter after giving a big boost in the prior period, though the monthly figures have been volatile thanks to tariffs. Chinese imports and exports both surged, potentially reflecting companies rushing shipments ahead of Trump’s latest increase in levies announced in May.

The wider trade gap shows how policies including the tariff war between the U.S. and China continue to buffet U.S. business activity and growth, despite Trump’s intent to shrink the deficit. A strong dollar and weaker expansion abroad are also weighing on exports, which were down from a year earlier, while consumer demand and front-loading of orders to avoid tariff deadlines have boosted imports.

Economists in a recent survey expected second-quarter growth to slow to a 1.8% annual pace from 3.1% in the first three months of the year, based on the median estimate.

A separate government report on Wednesday showed filings for U.S. unemployment benefits fell for the second time in three weeks, a sign the labor market is holding up before June jobs data are released later this week.

Xi Meeting

After meeting with Chinese President Xi Jinping on Saturday, Trump said the U.S. and China would restart negotiations as he holds off from imposing tariffs on an additional $300 billion on goods from the Asian country, though existing levies remain.

The worldwide grounding of Boeing Co.’s 737 Max model continued to weigh on the U.S. economy. While civilian aircraft exports rose to $3.1 billion in May, it’s still the second-lowest monthly total since 2012, according to data compiled by Bloomberg.

Overall exports totaled $210.6 billion, reflecting gains in passenger cars, soybeans, capital goods and consumer goods. Imports were $266.2 billion, boosted by crude oil, autos, capital goods and consumer goods.

The unadjusted merchandise deficit with Mexico widened to a record $9.6 billion in May on an all-time high in imports. Trump threatened tariffs against America’s southern neighbor at the end of May, which may be reflected in June trade data as companies scrambled to front-load imports into the U.S. for about a week at the start of last month.

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• After adjusting for inflation, which renders the numbers used to calculate gross domestic product, the goods trade deficit widened to $87 billion from $82.2 billion in the prior month.
• The real petroleum gap increased to an eight-month high of $10.7 billion as imports jumped, largely reflecting Canadian crude oil; excluding petroleum, the goods trade shortfall also widened.
• Exports and imports of goods account for about three-fourths of America’s total trade; the U.S. typically runs a deficit in merchandise trade and a surplus in services.

--With assistance from Jordan Yadoo and Sophie Caronello.

To contact the reporter on this story: Katia Dmitrieva in Washington at edmitrieva1@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Vince Golle

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