Talking Points:
- Advance trade goods deficit climbed to -$75.8 billion from -$70.6 billion previous
- US tax cuts and increased tariffs likely contributed to the increase
- The data could weigh on President Trump’s decision for the next round of tariffs on China and other trade negotiations
Data released Thursday revealed the US advance trade goods deficit rose in August. Imports rose and exports fell, resulting in a deficit of -$75.8 billion. The deficit was up from -$72 billion and read in higher than the expected -$70.6 billion. Exports for August were $137.9 billion, $2.3 billion less than July. Imports were $213.7 billion, an increase of $1.5 billion from the previous month.
The increase in imports could in-part be due to the tax cuts passed by the Trump administration, as consumers have more money to spend. In August, the two sectors with the largest increases in imports were autos and “other goods.” The sectors saw an increase of 3.2% and 5.1% respectively. The data is seasonally adjusted.
According to Census Bureau data, exports of “food and feed” along with industrial supplies were the most notable decreases. The areas fell 9.5% and 5.9% respectively. Industrial supplies include petroleum and petroleum products, a possible area of conversation in upcoming trade negotiations with Japan. In the coming months and as shale continues to boom, we may see the exports of industrial goods increase because of robust petroleum demand and flush shale supply.
Read up on the current economic conflict with A Brief History of Trade Wars.
The data was released just a few days after President Trump berated Chinese and other officials at the United Nations General Assembly for trade imbalances. Although the deficit data is lagging, the trade war is likely responsible for the decrease in “food and feed” exports as China decreases its purchases of American soybeans. The August figures will also likely influence the Trump administration’s trade policy on China.
On Thursday, the Chinese Commerce Ministry released a statement expressing their willingness to negotiate trade with the United States. Negotiations are crucial to resolving the trade conflict. Moving forward, the conflict will continue to impact advanced goods data especially as the $200 billion in tariffs take effect.
US Dollar Basket Price Chart, 1-Hour September 24th – September 27th
As we look to markets, the data was not the sole release at the time with other important figures hitting the wires simultaneously. Together the data, coupled with post- Fed decision confidence, drove both the Dollar basket and US equities firmly into the green Thursday morning.
S&P 500 Price Chart, 1-Hour September 24th – September 27th
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
Other US Dollar Resources:
1. US Dollar Tests Resistance at Q3 Open, Risk-Off Potential Re-Emerges- by James Stanley, Currency Strategist
2. USD/JPY Price Outlook: Yen Decision Time as Rally Tests Yearly Highs- by Michael Boutros, Currency Strategist
3. US Dollar, Yen Aim Higher as EU Politics Help Spoil Market Mood-by Ilya Spivak, Senior Currency Strategist
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