US Trade Gap Widens to Nine-Year High

The US trade deficit widened by more than forecast to a fresh nine-year high in February on broad-based demand for imports ahead of the Trump administration tariffs that have raised the specter of a trade war.

The gap increased 1.6% in February to $57.6 billion, compared with the median estimate of economists for $56.8 billion, commerce department data showed on Thursday. It was the sixth straight month with a wider deficit, the longest streak since 2000. Imports and exports both registered gains of 1.7%, Bloomberg reported.

While President Donald Trump has vowed to shrink the trade deficit, it may keep growing thanks to rising household spending, strong business investment and tax cuts that are boosting demand for imports. At the same time, his tariffs on some imported steel and aluminum, along with proposed taxes by US and China on goods from each country, represent a wild card for the outlook and have sparked financial-market swings in recent weeks.

Even before the metal tariffs took effect with exceptions for a number of trading partners, the fees were already making business more difficult for US manufacturers and other buyers.

The Institute for Supply Management said earlier this week that the tariff announcement helped send a measure of raw-material prices paid to an almost seven-year high in March, as businesses began stocking up.

Several categories of iron and steel imports showed gains in February, according to the trade report. Inbound shipments also included jumps in aircraft, pharmaceutical preparations and furniture and household goods.

Overall, imports advanced to $262 billion, boosted by capital goods, industrial supplies and materials, and foods, feeds and beverages. Exports rose to $204.4 billion, led by industrial supplies and materials, vehicles and capital goods. Improving global growth and a weaker dollar have been supporting overseas sales of American-made goods.

The report also showed the merchandise-trade gap with China, the world’s second-biggest economy, narrowed to $34.7 billion in February from $35.5 billion. The White House is seeking to cut $100 billion, or about 25%, from the annual deficit with China.

The goods-trade deficit with Mexico widened to $6.6 billion from $5.6 billion, and the gap with Europe increased to $15.3 billion from $15 billion.

The figures suggest trade may reduce the pace of economic growth in the first quarter, after it was a substantial drag on the economy in the final three months of 2017. Net exports subtracted 1.16 percentage points from fourth-quarter gross domestic product growth of 2.9% on an annualized basis.