US trade deficit widens as imports from China surge

Updated: 2015-10-06 22:12


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US exports in August declined to their lowest level since October 2012 and imports from China surged, fueling the largest expansion of America's trade deficit in five months, the Commerce Department reported Tuesday.

The report illustrates the US economy's vulnerabilities to a strong dollar and weak demand in foreign markets, which could impose further caution on the Federal Reserve's plans to raise interest rates.

The trade deficit swelled by 15.6 percent to $48.3 billion in August, according to data that is adjusted for seasonal factors. The scope of the increase was accentuated by the unusually narrow trade deficit registered in July.

The size of the gap stands well above the average levels seen in recent years. This puts the onus on US consumers to deliver stronger economic growth because the rest of the world will probably be a drag.

In August, imports rose 1.2 percent, even though America bought the least petroleum from abroad since September 2004.

A 3 percent increase in imports from China factored into the widening of the trade deficit. China's yuan currency has devalued sharply in recent months amid concerns of a possible crash in the Chinese economy, which is the world's second-largest after the US.

Imports of consumer goods rose by $4 billion, of which slightly more than half were cell phones and other household goods.

Overall exports fell 2 percent to their lowest level since October 2012. Exports to Mexico fell by $1.5 billion in August and the European Union bought $500 million less from America than it did in July, according to data on bilateral trade which is not seasonally adjusted.

The declines are partly due to expectations of higher interest rates in the US that have pushed the value of the dollar higher, reflecting the strength of America's economy relative to its trading partners. A stronger dollar makes US goods less competitive abroad.

But weaker demand abroad is also playing a role, and US Treasury Secretary Jack Lew will ask policymakers from other countries gathering in Lima, Peru, this week to stimulate their economies to kick-start global growth.