Widening US trade deficit gives Donald Trump a challenge to fulfil campaign reduction promise
Rising imports pushed up the US trade deficit by over $6bn in October and factory orders increased faster than expected, as domestic demand continues to stay strong in the world’s biggest economy before the arrival of Donald Trump in the White House.
Trump has promised to reduce the trade deficit when he takes office, but the figures show that his task is growing more difficult as the dollar stays relatively strong. The deficit grew to $42.6bn in October, up from $36.2bn the month before, according to data from the US Department of Commerce.
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A strengthening dollar makes imports cheaper for US consumers, but puts pressure on exports. The latter fell by £3.4bn in October, driven by steep falls in soybean and corn exports, but investors will be watching next month’s figures closely for signs that the big post-election jump in the dollar’s value has weakened exporters further.
Consumer goods imports accounted for the majority of the $3bn import increase, of which the biggest growth was in pharmaceutical preparations.
US factory orders grew by 2.7 per cent in the month, a significant acceleration from September’s rate of 0.6 per cent.
The US consumer’s voracious demand for imports has long been an important factor in emerging market economies, but there is significant doubt as to the effect of a Trump presidency.
Although his promised stimulus package on the campaign trail – mixing massive infrastructure spending with broad tax cuts – is set to boost US GDP, his avowed protectionist measures could have a significant impact on trade flows if the US economy turns inwards.