The report released by the US Department of Commerce’s Bureau of Economic Analysis on Tuesday (8th) shows that the US trade deficit in August significantly narrowed to its lowest level in five months due to a surge in exports reaching a historic high.
This report indicates that the trade deficit for goods and services in August, also known as the trade imbalance, decreased from $78.9 billion in July to $70.4 billion. The trade deficit in August was slightly lower than the market expectation of $70.6 billion, marking a 10.8% decrease from July.
Exports grew by 2%, reaching a historic high of $271.8 billion. Goods exports increased by 2.5% to $179.4 billion, the highest level since September 2022; consumer goods exports increased by $1 billion, primarily driven by pharmaceuticals; service exports grew by $900 million, reaching a historical high of $92.3 billion, largely benefiting from the increase in travel and government goods and services.
On the other hand, imports in August decreased by 0.9% to $342.2 billion. Goods imports dropped by 1.4% to $274.3 billion. Crude oil imports decreased by $1 billion. The average price of imported crude oil in August was $74.28 per barrel, compared to $75.96 in July. Imports of automobiles, parts, and engines also decreased by $1.3 billion.
According to a report by Reuters, Carl Weinberg, chief economist at High Frequency Economics, stated, “This report indicates that net trade supported the growth of the Gross Domestic Product (GDP) in August. Looking at the data from July and August, the net trade balance remained stable in the third quarter so far, with no significant increase or decrease in its impact on GDP growth.”
The report also shows that there have been slight changes in the ongoing trade imbalances between the United States and its major trading partners.
In August, the US trade surplus with Belgium shifted from $1 billion to a deficit of $600 million, while the trade deficit with Mexico expanded to $14.3 billion.
Furthermore, the trade deficit in goods with China decreased by $2.6 billion in August, falling to $24.7 billion. The trade deficit in goods with Canada also narrowed, decreasing by $3.8 billion to $3.9 billion.
Despite the surge in US exports in August, some economists predict that demand in certain foreign markets, especially in China and Europe, is expected to soften, leading to a slowdown in US exports.
Nicole Cervi, an economist at Wells Fargo, said to Reuters, “Global demand faces downside risks as the Chinese economy has not yet stabilized, and growth in the Eurozone also shows signs of fragility. On the other hand, with solid growth in personal income and a strong US dollar, domestic demand in the US is expected to remain robust. Overall, we believe that trade will somewhat drag on actual GDP growth throughout 2025.”
The US economy grew by 3% in the second quarter, and the latest real-time estimate for GDP in the third quarter updated by the Federal Reserve Bank of New York on Tuesday shows a growth rate of 3.2% from July to September.
The Bureau of Economic Analysis will release its preliminary estimate for third-quarter GDP on October 30, while the next US trade balance report will be published on November 5.
Following the release of US trade data on Tuesday, major Wall Street indices rose, with tech stocks rebounding amid a pullback in crude oil futures.
Stocks closed higher. The Dow Jones Industrial Average gained 126.13 points, or 0.3%; the S&P 500 index rose by 55.19 points, or 0.97%; the Nasdaq index climbed 259.02 points, or 1.45%; and the Philadelphia Semiconductor Index rose by 69.3 points, or 1.33%.