Trade Deficit Wider Than Expected

Renewed deepening in the deficit with China was enough to make for a wider-than-expected US trade deficit of $55.5 billion in May. Country data in this report are not seasonally adjusted but the results are clear as May's deficit with China came in at $30.2 billion vs $26.9 billion in April and a long-term low of $20.8 billion in March.

The heavy red ink in May masks a favorable 2.0 percent jump in exports to $210.6 billion. Service exports rose 0.5 percent in the month to $69.8 billion while goods exports, reflecting wide gains including for civilian aircraft, jumped 2.8 percent to $140.8 billion. Imports, however, outpaced exports, jumping 3.3 percent to $266.2 billion in the month and including sharp increases for autos and consumer goods. For foods, which are closely watched given US-China tensions, both imports and exports slipped in May.

May included increases in US tariff duties on $200 billion of Chinese goods, raising prices and contributing to the deeper bilateral deficit. Whether this deficit remains wide or begins to shrink again in coming months will be key to net exports and their impact on GDP. For the second quarter, net exports after today's report look to pull down GDP.