US trade deficit shrinks to $58.3 billion, smallest since 2020

The US trade deficit shrank to an almost three-year low in August, reflecting a pullback in American demand for foreign merchandise and a pickup in goods shipments overseas.

The shortfall in goods and services trade narrowed 9.9% from the prior month to $58.3 billion, Commerce Department data showed Thursday. The figures aren’t adjusted for inflation. The value of imports declined 0.7%, while exports increased 1.6%.

The figures suggest softer domestic demand for both consumer goods and capital equipment. Borrowing costs that have climbed rapidly risk further limiting purchases of overseas merchandise.

The report showed declines in imports for capital goods, including semiconductors, as well as decreases in cell phones and other consumer goods. Exports were boosted by a rise in shipments of capital and consumer goods. Motor vehicles exports, meanwhile, fell.

The pickup in exports may prove short-lived as a dollar near a one-year high makes US goods and services more expensive for overseas customers. Exports in August were boosted by an increase in the value of petroleum shipments.

The data will help shape economists’ estimates for third-quarter gross domestic product. After contributing to growth for several quarters, net exports were broadly neutral to GDP in the April-June period. Before the report, the Federal Reserve Bank of Atlanta’s GDPNow forecast projected trade would add almost 1 percentage point to growth during the third quarter.

On an inflation-adjusted basis, the merchandise trade deficit shrank to $83.9 billion in August, the smallest since March. 

Digging Deeper

• Travel exports — or spending by visitors to the US — increased to the highest level since December 2019
• Travel imports — a measure of Americans traveling abroad — rose slightly
• The US merchandise-trade deficit with China narrowed about $1.3 billion to a five-month low of $22.7 billion
• China’s share of US goods imports fell to the lowest level since 2005 in the 12 months through August, averaging 14.2% over that period