U.S. International Trade Deficit Widens in July

The U.S. trade deficit in goods and services (BOP basis) widened to $78.8 billion in July, the largest deficit since June 2022, from a downwardly revised $73.0 billion in June (previously $73.1 billion). The Action Economics Forecast Survey expected a deficit of $78.7 billion in July. Exports rose 0.5% m/m (5.0% y/y) last month following a 1.7% m/m increase in June. Imports jumped 2.1% m/m (8.4% y/y) following a 0.7% m/m rise in June.

The goods deficit (Census basis) narrowed to $102.8 billion in July from $96.5 billion in June. This was the largest goods deficit since May 2022. Total goods exports were essentially unchanged in July (+4.4% y/y) after a 2.8% m/m increase in June. Exports of capital goods posted a solid 3.4% m/m increase in July as also did “other” exports. Exports of foods, feeds and beverages increase 1.3% m/m. By contrast, auto exports collapsed 11.2% m/m, their largest monthly decline since the pandemic (April 2020) and exports of nonfood consumer goods excluding autos tumbled 3.6% m/m, their largest monthly decline since October 2023.

Total goods imports jumped 2.3% m/m (+8.3% y/y) in July following a 0.8% monthly gain in June. The increase in July was led by a 5.1% m/m gain in imports of industrial supplies and a 4.1% m/m increase in capital goods imports. Auto imports slipped 0.5% m/m while the miscellaneous category called “other” declined 4.3% m/m.

The services surplus narrowed for the second consecutive month to $24.3 billion in July from $24.5 billion in June and $24.9 billion in May. Services exports edged up 0.7% m/m (7.0% y/y) after having been essentially unchanged in June. Exports of maintenance and repair services rose 2.1% m/m in July; exported construction services increased 3.3% m/m; exported financial services gained 1.0% m/m; exports of government goods and services soared 17.3% m/m, its largest monthly gain since July 2009.

Imports of services increased 1.1% m/m (8.9% y/y) in July versus a 0.5% monthly increase in June. The July increase was led by a 10.9% m/m jump in charges for use of intellectual property, the largest monthly gain since February 2022. Insurance imports rose 2.3% m/m in July; transport imports increased 2.1% m/m; construction services imports gained 1.9% m/m. Travel imports fell 1.8% m/m, their first monthly decline in three months.

The real (inflation-adjusted) goods trade deficit (customs value) widened to $97.6 billion in July from $91.4 billion in June. This was well below the $93.0 billion average monthly real trade deficit in the second quarter, indicating that net exports are on course to be a drag on overall real GDP growth in Q3. They subtracted 77 basis points in Q2 and 65 basis points in Q1.

The U.S. goods trade deficit with China widened to $27.2 billion in July from $22.3 billion in June with exports to China plummeting 7.8% m/m while imports from China jumped 11.3% m/m. The goods trade deficit with the European Union widened to $18.4 billion in July from $18.0 billion in June while the deficit with Japan widened to $5.4 billion in July from $4.9 billion June.

The international trade data, including relevant data on oil prices, can be found in Haver’s USECON database. Detailed figures on international trade are available in the USINT database. The expectations figures are from the Action Economics Forecast Survey in AS1REPNA.