The U.S. trade deficit narrowed slightly to $70.1 billion in July as economic recovery overseas helped boost American exports while imports declined.
The Commerce Department reported Thursday that the trade deficit fell 4.3% in July after surging to a record $73.2 billion in June.
The trade deficit represents the gap between what the country exports to the rest of the world and the imports it purchases from other countries.
In July, exports jumped 1.3% to $212.6 billion, reflecting revived overseas demand, while imports edged down a slight 0.2% to $282.9 billion.
The politically sensitive goods deficit with China rose 2.9% in July from June to $28.6 billion and totals $187.2 billion through the first seven months of this year, up 15% from the same period a year ago.
As usual, the trade deficit with China was the largest U.S. deficit with any country.
Donald Trump targeted what he saw as China’s unfair trade practices during his presidency, triggering a trade war between the world’s two largest economies, with China retaliating to America’s punitive tariffs by raising its own tariffs on American products, most notably on soybeans.
President Joe Biden has so far not indicated how he plans to deal with the economic tensions between the two nations.
So far this year, the U.S. trade deficit totals $141.7 billion, 6% below the total for the same period last year.
The deficit for all of 2020 was $676.7 billion, 17.4% higher than in 2019.
Economists believe that deficits for the rest of this year should moderate as the surge in consumer demand after the country re-opened will slow, reducing demand for foreign goods, while U.S. exports should continue rising as overseas economies recovery.
However, analysts caution that a lot will depend on the path of the COVID cases in coming months both in the United States and abroad.
“The pandemic will continue to pose a downside risk to trade flows, but we expect a gradual normalization in trade dynamics as vaccinations increase and supply disruptions slowly ease,” said Mahir Rasheed, U.S. economist at Oxford Economics.
The deficit in goods totaled $87.7 billion in July, down from a $93.3 billion goods deficit in June.
The U.S. surplus in services, which has been hurt this year by weakness in air travel, fell to $17.7 billion in July, down from a services surplus of $20 billion in June.
However, a big part of the decline in July reflected stronger imports of services which reflected the payments NBC made to cover the summer Olympics in Tokyo.