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Despite Tariffs, US Trade Deficit With China Increases In July

Despite Tariffs, US Trade Deficit With China Increases In July
Despite the trade tariffs imposed on Chinese imports into the country by United States president Donald Trump, the trade deficit of the country with   China touched a six-month high for the month of July even though the US economy as a whole saw a slight contracting in its trade deficit.
This was evident from the data by the Commerce Department even as the trade war between the China and the US escalated this week with the latest round of tariffs being imposed last Sunday.
Fears of a recession were triggered after a comment made on Tuesday by US president Donald Trump in which he claimed that if the trade negotiations dragged on and if he were to be elected for a second term, he would be “tougher” on Beijing.
An increase in exports and drop in imports resulted in a drop of 2.7 per cent in trade deficit, said the US Commerce Department. The Department also revised down the data for June which resulted in shrinkage of the trade gap to $55.2 billion compared to the earlier reported gap of $55.5 billion.
However there was a 9.4 per cent increase, at $32.8 billion, in the goods trade deficit of the US with China with which it is currently in an acrimonious trade war for more than a year. Imports from China increased by 6.4 per cent while exports to China dropped by 3.3 per cent for the month of July. The US- European Union trade deficit also touched a record high even as the US-Germany trade deficit reaching a high since August 2015.
A wide range of consumer products imported from China, including smart speakers, bluetooth headphones, footwear and clothing, were subjected to an import tariff of 15 per cent by the US.  An additional duty on a range of US imports worth $75 billion was imposed by China in retaliation which included a 5 per cent levy on US crude oil.
Ever since the trade war started about more than a year ago, it has significantly affected the global financial markets, slowed down global trade and raised concerns about a global economic slowdown – and even a recession.
There was little impact of the trade data on the US financial markets.
According to a survey of manufacturers, in August, a measure of export orders received by factories dropped to its lowest since April 2009.
Data showed that consumer goods had boosted US exports in July which came in at $1.5 billion. There was an increase of $0.8 billion in the export of capital goods as well as an increase in motor vehicles exports. However there was a $1.7 billion drop in exports of industrial supplies and materials and a drop of $0.5 billion in export of crude oil.

Christopher J. Mitchell

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