Sharp Rise In The U.S. Trade Deficit – Showing Excess Value Of Imports Over Exports

Sharp Rise In The U.S. Trade Deficit – Showing Excess Value Of Imports Over Exports

The trade gap hits 10 months high– $44.5 Billion, as the imports increasedby 1.9% while exports struggled to risejust by 0.3%.
The Commerce Department revealed the figures on Friday that the trade gap in May was $41 Billion that increased by 8.7% within a month to $44.5 Billion in June.And this was recorded to be the biggest deficit since August 2015.
June marked the third month in a row to witness a rise in the trade gap this year. Economists had forecast this rise after a previously reported shortfall in April and May.
HigherInternational oil prices and rising domestic demand were the biggest factors of increased import for the U.S. The average price of a barrel of imported crude oil climbed by $5.19 in June (from May), which is the biggest one-month price rise since May 2011.
The increase in imports of consumer goods corresponds to 2.8% increase in imports from China – which rose the politically sensitive U.S. – China trade deficit by 2.5%i.e. $29.8 billion in June (the highest in seven months.).
The main cause of undercut export growth was blamed on the dollar's sharp rally against the currencies of the United States' main trading partners between June 2014 and December 2015. The dollar was weaker against other currencies since March, but it remained substantially stronger compared with earlier in the recovery. This increase in Dollar value increased the price of American goods abroad which inturn resulted in reduced demand and sales of U.S. goods and services. The export opportunity then shifted to other foreign countries, while imports kept on piling to the U.S.
The U.S. import export deficit with Canada increased to $300 million in June, up from $100 million in May, which is the highest level in a year.But with European Union, UK and the China the trends are reverse.
Ever since the British referendum of June 23 this year,there has been an increase in overall exports to these countries. The dollar has been regaining strength and theU.S. markets started to quickly regain the losses. Economists expect that Brexit would not cause a large impact on the U.S. economy.
U.S. exports to the European Union jumped 7.8% since after Brexit, with goods shipped to the UK soaring 18.2%. China has also been buying more U.S. goods since June, because of which the exports to China seem to be rising.
Many multinational enterprises are together causing US’s overall trade gap, including Bombardier Inc, Kraft Heinz Co, krafts, and SeaWorld Entertainment.
Bombardier Inc for example, faced a wider loss than estimated. They took an onerous contract of $492 Million to build 127 planes. As per analysts, Bombardier had to drop its price up to 75% to get this contract, which means it may have to struggle to get new orders at favorable margins.
Bombardier is also finding it challenging to meet the requirements of winning a streetcar order for Toronto. This followed the company’s big loss of two big rail contracts in the U.S. which were awarded to a State-owned Chinese competitor.
According to the commerce statement on Friday, their market value was adjusted to 6 cents a share. Analysts had predicted a revenue decrease estimate to $4.18 Billion and the actual figures were very close to $4.31 billion.
SeaWorld Entertainment also reports a revenue decrease of $20.5 Million as compared to their revenue in the second quarter last year. The CEO Joel Manby blames the decline in Brazilian guests and Orlando’s softening tourism industry for 7.6% attendance drop in second quarter. It is a Florida problem not our company problem, he added.
This economic downturn is being tracked and discussed by experts all around the country. Economists have been sharing their invaluable insights to the current scenario and possible solutions. 
Donald Trump, the Republican presidential nominee has accused the Obama administration to have failed in protecting U.S. workers who have seen jobs disappear because of unfair trade practices in China and other countries.
Trump said he would also kill the pending Trans-Pacific Partnership trade agreement and take a more aggressive trading approach with China.
The U.S. Chamber of Commerce, which has normally been an ally of Republicans on trade policies, argue that Trump's approach to international trade may cost 3.5 million U.S. jobs and can result in price hike and a weaker economy.

Source By: Entrepreneur India

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