Trade deficit expanded in July

September 6, 2023

The U.S. international trade deficit grew by a modest 2.0% in July to $65.0 billion, following a downwardly revised deficit in June. The increase in the deficit reflected a larger increase in imports of 1.7% than in exports at 1.6%. Even so, since July of last year the deficit has declined by 21.4%.

Imports increased by $5.2 billion in July on stronger demand for consumer goods and capital goods. Cell phones and household goods made up the bulk of the jump in consumer goods, likely as part of the holiday ordering season. For capital goods, both semiconductors and computers posted increases. Meanwhile, industrial supplies and materials took a hit despite higher construction spending. Retail inventories expanded in July across the board; inventories for motor vehicle and parts dealers grew the most. Though imports for transportation decreased, the record-breaking summer for vacations abroad increased imports of travel related services.

Exports also rose, offsetting most of the negative impact to GDP from imports. Over half of the increase in exports can be explained by passenger cars, trucks, buses and other vehicles growing by $1.7 billion in July. Exports of industrial supplies also increased, mainly crude oil and gold. Exports of both travel and transportation services increased.

The deficit with China grew on a larger increase in imports than in exports. That breaks with the trend of the past few months but does not reverse it. The deficit with China increased by $1.2 billion in July, but it fell by $2.1 billion the month before.