Biden administration keeps Trump sanctions on China
The numbers: The U.S. trade deficit rose 4.2% in August to a record high, reflecting strong imports of medicine and consumer goods as retailers stocked up ahead of the holiday shopping season.
The trade gap widened to $73.3 billion from $70.3 billion in the prior month, the government said Tuesday
Imports rose 1.4% to an all-time high of $287 billion. They are now 14% higher compared to the last month before the onset of the coronavirus pandemic.
U.S. exports increased a smaller 0.5% to $213.7 billion, but they now top pre-pandemic levels and are not far from the all-time high set in May 2018.
The U.S. trade deficit in goods with China, meanwhile, jumped 12% to $28.1 billion in August.
The deficit with China is running well above 2020 levels, when it fell because of the pandemic as well as steep U.S. tariffs originally put in place by former President Donald Trump.
On Monday, the Biden White House announced its own strategy to combat unfair Chinese trade practices. While Democrats have adopted a more conciliatory tone than an often-combative Trump, the Biden strategy keeps most of Trump’s sanctions and agreements with the Chinese in place for now.
Read: Biden to keep Trump’s China tariffs in place as trade tensions remain high
Big picture: The nation’s trade deficit soared to record highs during the pandemic because the U.S. economy recovered faster and Americans gobbled up foreign-made goods such as cell phones, computers and the like.
Deficits are likely to decline as the rest of the world recovers and buys more American imports, but the U.S. is expected to run large trade gaps for the foreseeable future. The U.S. has become dependent on imports over the past few decades and no longer produces as many of the goods that Americans covet,
Key details: Imports of consumer goods such as cell phones, computers and toys rose 0.6% in August.
Retailers have stocked up earlier than usual to make sure they have enough products on their shelves before the holiday shopping season. The pandemic has wreaked havoc on the movement of goods around the world.
The U.S. also imported more pharmaceutical drugs and industrial supplies.
The increase in exports was concentrated in industrial supplies and natural gas.
Both exports and imports of new cars and trucks fell sharply. The global auto industry is in a world of hurt because of a unprecedented shortage of computer chips that is unlikely to clear up soon.
The shortage has limited auto production and raised prices to record highs, scaring off many potential buyers.
The value of American-made autos shipped abroad fell by $1 billion in August. General Motors (GM) and Ford (F) have had to stop some assembly lines temporarily because of the semiconductor crunch.
Market reaction: The Dow Jones Industrial Average and S&P500 were set to open higher on Tuesday after a sharp decline the day before. The trade report usually has little impact on investors.
(END) Dow Jones Newswires
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