US trade deficit hits 5-month high as imports from Mexico soar
America’s politically-sensitive trade deficit jumped to a five-month high in May as imports of automobiles rose to their highest on record, according to government data released Wednesday.
The trade deficit with Mexico, a country President Donald Trump threatened with stinging tariffs, rose to its highest in a decade, according to the Commerce Department report.
Financial markets in May were whipsawed by the shifting uncertainties of Trump’s trade wars, and fears of the impact of more tariffs on the US economy.
The May data should prove frustrating for the president, who has made eliminating the deficit a signature goal of his administration, saying it is a sign other countries are stealing from the United States.
Trump on Wednesday lobbed some of his frequently-made accusations at China and Europe, accusing them of driving down the value of their currencies to remain competitive.
The US trade gap jumped 8.4 percent to $55.5 billion, seasonally adjusted, well above analyst forecasts.
That surge combined with the April trade gap, which was revised higher than originally reported, could weigh on growth forecasts for the second quarter.
May was another challenging month for global trade, as Trump threatened to stifle commerce with major partners: Trade talks with China nearly collapsed, and Trump threatened to impose duties on all Chinese imports -- and on all goods from Mexico in a dispute over migrants at the southern border.
- Reorienting trade - Those dangers have receded for the moment following truces with Beijing and Mexico City, but while those positive turns remained uncertain importers may have rushed in to lock in lower prices and rebuild inventories.
“China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA,” Trump said on Twitter.
Trump also implied that the Federal Reserve should likewise ease monetary policy, something he has called for in the past.
The US Treasury, however, again reported in May that China was not manipulating its currency and departing European Central Bank Chief Mario Draghi last month rejected similar accusations from Trump, saying the ECB does not target the exchange rate.
Imports of goods and services rose 3.3 percent to $266.2 billion in the latest month, the largest jump in more than four years as Americans bought more passenger cars, crude oil, semiconductors and consumer items, the report said.
Economists John Ryding and Conrad DeQuadros of RDQ Economics question whether the trade will impact US growth in the April-June quarter.
“It is not trade that is subtracting from growth but domestic supply constraints that are holding back growth,” they said in an analysis. “Imports have surged over the last three months but these imports are vital for domestic production.” However forecasters Macroeconomic Advisors trimmed their second-quarter GDP forecast by a tenth of a point to two percent as a result of the May data.