US trade deficit increases 5.3 per cent to $37.4 billion

WASHINGTON – The U.S. trade deficit, after falling to the lowest point in more than two years, increased in April as a surge in imported goods outpaced a rebound in exports.

The Commerce Department said Friday that the deficit increased 5.3 per cent in April to $37.4 billion, up from an imbalance of $35.5 billion in March. Exports increased 1.5 per cent to $182.8 billion but imports rose faster, increasing 2.1 per cent to $220.2 billion.

The politically sensitive deficit with China surged 16.3 per cent to $24.3 billion, a development certain to heighten trade tensions between the world’s two largest economies.

So far this year, the deficit is running 4.8 per cent below the pace set a year ago with a fall in imports offsetting further weakness in U.S. exports, which have been hurt by a slowdown in global growth.

U.S. export sales have also been hurt by a strong dollar which makes American products more expensive on overseas markets. However, the dollar has weakened a bit since peaking earlier this year. If that trend continues, it could help export sales going forward.

The deficit for all of 2015 totalled $500.4 billion, up 2.1 per cent from the previous year. The higher deficit subtracted 0.6 percentage point from overall growth in a year when the economy, as measured by the gross domestic product, expanded by a modest 2.4 per cent.

Steven Ricchiuto, chief economist at Mizuho bank in New York, said that the April trade report was weaker than expected and would likely cause forecasters to trim their expectations for overall growth in the April-June quarter to a rate of 1.5 per cent to 1.7 per cent, down from 2 per cent before the trade report was released.

America’s perennial trade deficits have been a topic in this year’s election campaigns with presumptive Republican presidential nominee Donald Trump attacking the Obama administration for failing to protect American workers from unfair foreign competition.

Trump has accused China and other nations of pursuing policies that have cost millions of American jobs. As president, Trump has said he would seek to impose a 45 per cent tariff on Chinese goods to try to halt the objectionable practices.

U.S. and Chinese officials will meet next week in Beijing for annual talks between the two nations aimed at resolving disagreements between the two nations in the areas of trade and foreign policy. Treasury Secretary Jacob Lew, leading the economic talks, said that China could suffer bad consequences for its economy if it backs away from its program to open its markets and reduce its reliance on export-led growth.

The big increase in the U.S. deficit with China in April reflected a surge in shipments of Chinese goods after they had been curtailed in March, a drop that reflected disruptions caused by the China’s Lunar New Year holiday.

The United States recently imposed tariffs of 267 per cent on imports of cold-rolled steel from China, accusing the Chinese of selling the steel below cost in the U.S. market, just one of a number of trade tensions between the two nations. The value of the China’s currency has been fallen to a five-year low against the dollar, raising fresh accusations that China is manipulating its currency to gain trade advantages. A weaker yuan makes Chinese goods cheaper for U.S. consumers and American products more expensive in China.

Even with the April increase in the U.S. deficit with China, the imbalance so far this year is running 7n per cent below the level of a year ago. That would still keep it on track to be the highest deficit America has with any country.

The United States ran a $900 million surplus with Canada in April, the highest monthly surplus on record. Byh contrast, the U.S. deficit with Mexico, the other partner in the North American Free Trade Agreement, rose 5.7 per cent to $5.7 billion. Trump has called NAFTA an example of the type of bad trade agreement that has cost American jobs.

The U.S. deficit with the European Union totalled $11.9 billion, an increase of 9.3 per cent from March.