U.S. Trade Deficit Deepens In July

Exports, which have been a major source of U.S. economic strength this year, decreased to $120 billion in July and imports increased to $188 billion. A result was that the U.S. international trade deficit in goods and services deepened to $68 billion, the largest monthly deficit this year and $3.2 billion greater than June's revised deficit of $64.8 billion, the U.S. Commerce Department reported on September 12. July's data are the most recent available.

July's exports of $119.9 billion were $1.3 billion less than June exports of $121.2 billion. July imports of $188 billion were $1.9 billion more than June's imports of $186.1 billion.

For the first seven months of 2006, the seasonally adjusted trade deficit totaled $453 billion, some $54.8 billion more than the $398.2 billion total for the first seven months of 2005.

In July, the U.S.'s largest single-country trade deficit was, again, with China. However, July's $19.58 billion deficit with China was $130 million less than June's deficit of $19.71 billion. For the first seven months of 2006, the U.S. trade deficit with China was $121.3 billion, nearly half again as large as the $70.6 billion deficit with all 25 countries of the European Union.

"Near term, the ballooning trade deficit will tax third-quarter [GDP] growth by about two-tenths of a percentage point," predicts Peter Morici, a professor at the University of Maryland's Smith School of Business at College Park. "Longer term, it slows investments in R&D-intensive export-oriented industries."

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