The U.S. trade deficit narrowed sharply in August to its lowest level in five months, as exports surged to a record high, according to a report by the U.S. Census Bureau on Oct. 8.
The goods and services deficit, also known as the trade gap, decreased to $70.4 billion in August, down from a revised $78.9 billion in July. This was slightly lower than the $70.6 billion forecasted by experts.
The decline in the deficit in August was a 10.8 percent drop from the previous month, with exports reaching an all-time high of $271.8 billion, up 2 percent, while imports decreased by 0.9 percent to $342.2 billion.
Recent trade balance data suggests that net trade may have a neutral impact on GDP growth for the third quarter.
“This report indicates that net trade contributed positively to GDP growth in August,” said Carl Weinberg, chief economist at High Frequency Economics. “Based on the figures for July and August, it appears that net trade has had a neutral effect on GDP growth so far in the third quarter.”
The report also highlighted changes in trade imbalances with major trading partners of the U.S.
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For instance, the trade gap with Canada decreased by $3.8 billion to $3.9 billion in August, with exports to Canada increasing by $1.1 billion to $28.5 billion and imports decreasing by $2.7 billion to $32.3 billion.
The U.S. trade balance with Belgium shifted from a $1 billion surplus to a $600 million deficit in August, while the trade gap with Mexico widened to $14.3 billion.
The trade deficit with China decreased by $2.6 billion to $24.7 billion in August, as exports rose by $1.1 billion to $12.6 billion and imports fell by $1.5 billion to $37.3 billion.
Despite the increase in U.S. exports in August, some economists anticipate a decrease due to softening demand in foreign markets, particularly in China and Europe.
Nicole Cervi, an economist at Wells Fargo, stated, “Global demand risks are skewed to the downside, as China’s economy has yet to stabilize significantly and growth in the eurozone is showing signs of fragility. However, domestic demand is expected to remain strong due to solid personal income growth and a robust dollar. Overall, we anticipate trade to have a modest negative impact on real GDP growth in 2025.”
The U.S. economy expanded by 3 percent in the second quarter, with the Federal Reserve Bank of New York’s latest real-time GDP estimate projecting a 3.2 percent growth rate for the third quarter from July to September.
The U.S. Bureau of Economic Analysis is set to release its initial third-quarter GDP estimate on Oct. 30, while the next U.S. trade balance report is scheduled for Nov. 5.
Following the release of the trade data, major stock indexes on Wall Street saw gains, with tech stocks rebounding alongside a decline in crude oil futures.
Reuters contributed to this report.
