U.S. Trade Deficit Balloons to Record in July : Economy: Influx of Asian, European goods helps push imbalance to $25.2 billion. Figure is higher than expected.
The U.S. trade deficit swelled to a record $25.2 billion in July as Asian and European goods flooded the U.S. market as never before, the Commerce Department said Tuesday.
The surge in the deficit rattled stocks, bonds and the dollar. The trade gap was much wider than the $23.8 billion forecast by Wall Street analysts, and greater than the $24.6-billion deficit in June, which was also a record.
Trade imbalances with China, Japan, Western Europe and Canada rose to record highs in July. The deficit with Western Europe ballooned by 38% as U.S. exports to the region declined, while the gap with Canada surged 28%.
U.S. Commerce Secretary Bill Daley warned that the deficit could grow even larger in the months ahead; he said it is critical that U.S. trading partners open their markets.
Daley singled out China for criticism, saying its growing deficit with the United States could complicate World Trade Organization negotiations. Beijing needs U.S. support to join the 134-member global trade body.
Although the growing deficit reflects U.S. economic vigor and strong consumer demand, compared with weakness in parts of Europe and Asia, experts said it could have dire consequences.
“With each new record trade deficit, the dollar grows more vulnerable,” said Michael Fenollosa, an international economist with John Hancock Mutual Life Insurance Co.
The Commerce Department said imports into the United States rose for a seventh consecutive month in July to a record $104.22 billion, as U.S. companies and consumers bought up a wide range of foreign-made products, from televisions to luxury cars.
The surge in imports far outpaced U.S. exports of $79 billion in July, up from $78.6 billion in the previous month. The Commerce Department said U.S. service providers, which include insurance companies and travel agencies, enjoyed a record $23.2 billion in foreign sales in July.
The trade deficit with Western Europe rose to a record $6.8 billion in July, up from $4.9 billion in the previous month.
U.S. imports from China rose to a new high of $7.4 billion, pushing the deficit to a record $6.3 billion. Exports to China fell to $1.1 billion from $1.5 billion in June, the Commerce Department said.
The deficit with Japan was also record-setting, at $6.8 billion, up from $6.3 billion in June.
The deficit with Canada has surged in the first seven months of 1999 to a total $16.9 billion. In July alone, the gap rose to a record $3.3 billion, up from $2.6 billion. But the gap with Mexico declined to $2.1 billion from $2.5 billion in June.
The Commerce Department said trade with Canada and Mexico--partners with the United States in the North American Free Trade Agreement--accounted for nearly a third of the total increase in the deficit in goods.
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Trade Deficit
The overall gap continues to reflect a deficit in the trade of goods and a surplus in services. In billions of dollars:
July: -$25.2 billion
Source: Commerce Department
