US Trade Deficit Expands In October

The US goods and services trade deficit for October widened to $42.6bn from a revised $36.2bn for September, which was originally reported as a $36.4bn shortfall. The deficit was the largest for four months and higher than the consensus forecast of $41.7bn.
The U.S. trade deficit climbed in October from its lowest monthly level in nearly three years. Imports of consumer goods such as medicine, cellphones and clothing increased, while exports of soybeans, gold and artwork tumbled which fueled the monthly widening of the trade gap.
Exports of foods, feeds and beverages dropped USD 1.5 billion, accounting for around 44 percent of the USD 3.4 billion drop in total goods exports. This probably shows a continuation of the unwind of the rise in soybean exports witnessed in the third quarter.
In the meantime, imports rose by around USD 2.1 billion, with the bulk of that reflecting a sharp increase in imports of consumer goods, probably because of importers bringing in goods before the holidays. In any case, a reading consistent with the estimate is expected to at least weigh on the fourth quarter GDP estimates for the time being, according to Societe Generale.
Trump has often lambasted the U.S. trade deficit as a "they win, we lose" proposition, casting it as a weakness of the U.S. economy, costing American jobs”.
"Our trade deficit...is like having a business that continues to lose money every single year," Trump said earlier this year.
Trump's criticism of the trade deficit is a major reason why he wants to renegotiate trade deals and slap tariffs on Mexico and China.
A larger trade deficit acts as a drag on growth because it means America is buying more from foreign countries than it is selling. But the pace of exports picked up during the July-September quarter, contributing a solid 1.2 percentage points to annualized growth of 3.2 per cent during the quarter.
So far this year, the trade deficit is running 2.1 percent below its 2015 levels. The United States has been exporting more food but fewer industrial supplies, oilfield equipment, autos and consumer goods. But the country has also cut back on imports of steel, oil, aircraft, computer accessories and televisions, among other goods, leading to a narrowing of the overall trade deficit.
There will also be some fresh concerns surrounding the outlook for exports, especially as there had been some vulnerability before the dollar’s surge following the US elections. The Federal Reserve will be sensitive to the issue of competitiveness and there will be some concerns surrounding the dollar’s impact on exports.
The slightly higher than expected deficit will lead to a slight downgrading of Q4 GDP estimates with trade liable to be a negative contributor to GDP, although the overall impact should be limited.