The U.S. trade deficit narrowed sharply in August to its lowest level in five months, as exports surged to a record high, the U.S. Census Bureau reported on Oct. 8.
The goods and services deficit, also known as the trade gap, fell to $70.4 billion in August, down from a revised $78.9 billion in July, according to the report. The August trade deficit was slightly less than the $70.6 billion forecasters expected.
August’s deficit decline represents a 10.8 percent decrease from the prior month’s figures, as exports climbed 2 percent, to hit an all-time high of $271.8 billion. Imports edged down 0.9 percent, to $342.2 billion.
The trade balance data from the past several months suggests that net trade may have a neutral impact on gross domestic product (GDP) growth for the third quarter.
“This report says that net trade supports GDP growth in August,” said Carl Weinberg, chief economist at High Frequency Economics. “Putting together July and August figures suggests that net trade is flat so far in third quarter, making no significant addition or subtraction to GDP growth so far.”
The report also showed slight shifts in the ongoing trade imbalances with America’s major trading partners.
The trade gap with Canada, for example, contracted, falling by $3.8 billion, to $3.9 billion, as exports from the United States to its northern neighbor rose $1.1 billion, to $28.5 billion, and imports dropped by $2.7 billion, to $32.3 billion.
The U.S. trade balance with Belgium shifted from a surplus of $1 billion to a deficit of $600 million in August, while the trade gap with Mexico widened to $14.3 billion.
The politically sensitive trade deficit with China narrowed by $2.6 billion, to $24.7 billion in August, as exports rose by $1.1 billion, to $12.6 billion, while imports fell by $1.5 billion, to $37.3 billion.
Despite the surge in exports from the United States in August, some economists expressed expectations for a pullback amid predictions for softening demand in some foreign markets, in particular China and Europe.
“The risks to global demand are tilted to the downside, as China’s economy has yet to meaningfully stabilize and growth across the eurozone is showing some signs of fragility,” said Nicole Cervi, an economist at Wells Fargo. “On the flip side, domestic demand is poised to remain firm amid solid personal income growth and a strong dollar. Taken together, we look for trade to be a modest drag on real GDP growth throughout 2025.”
The U.S. economy grew by 3 percent in the second quarter, with the latest real-time GDP estimate for the third quarter—updated on Oct. 8 by the Federal Reserve Bank of New York—projects a 3.2 percent pace of growth in the July–September period.
The U.S. Bureau of Economic Analysis is scheduled to release its first estimate of third-quarter GDP on Oct. 30, while the next U.S. trade balance report is due on Nov. 5.
Following Tuesday’s release of the trade data, Wall Street’s main equities indexes traded higher, as tech stocks bounced back amid a pullback in crude oil futures.
Reuters contributed to this report.
