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Trade deficit shrinking as tariff battle escalates

The United States’ deficit in goods and services trade narrowed for the third straight month in May, falling to its lowest level in 18 months.

   The U.S. trade deficit continued to shrink in May, narrowing for the third straight month and falling to its lowest level since October 2016.
   The deficit in goods and services trade fell another 6.6 percent to $43.1 billion for the month as surging exports more than offset an increase in imports, according to the most recent data from the U.S. Department of Commerce’s Bureau of Economic Analysis.
   The May figures followed revised drops of 18.2 percent in March and 2.4 percent in April that were preceded by six straight months of growth.
   U.S. exports climbed 1.9 percent in May to reach $215.3 billion, while the nation’s imports ticked up 0.4 percent to $258.4 billion.
   Prior to the April revision, which pegged the trade deficit at $46.1 billion rather than $46.2 billion as previously reported, economists polled by Reuters had projected the trade deficit to decline $43.7 billion in May.
   The three-month moving average of the goods and services deficit has now fallen 8.5 percent to $45.4 billion for the three months ending in May, with average exports increasing 1.5 percent to $212.4 billion and average imports down 0.4 percent to $257.9 billion, according to BEA.
   On a year-over-year basis, however, the three-month average goods and services deficit is still up 0.4 percent from the same 2017 period, as exports and imports have increased $19.9 billion (10.3 percent) and $20.1 billion (8.5 percent), respectively.
   The latest trade deficit figures were released on the same day that the United States and China fired the first shots in a simmering trade battle, each officially adopting an additional 25 percent tariff on $34 billion in imports from the other country.
   BEA said the U.S. deficit with China increased 3.9 percent to $32 billion in May compared with the previous month, even as President Donald Trump and his administration ramped up pressure on the Chinese government to reduce the bilateral trade imbalance by purchasing more American goods and services.
   Tensions over recently imposed U.S. tariffs on steel and aluminum imports also boiled over in the last month, with key trading partners and allies like the European Union, Canada and Mexico all imposing retaliatory duties in response.
   The country’s deficits with the EU and Mexico shrank 10.2 percent to $11.9 billion and 3.4 percent to $5.8 billion, respectively, in May, while the U.S.-Canada deficit jumped 24 percent to nearly $2.2 billion compared with the previous month.