US trade deficit widens in July on imports

The U.S. trade deficit widened sharply in July as businesses front-loaded imports in anticipation of higher tariffs on goods, suggesting that trade could remain a drag on economic growth in the third quarter.

The trade gap increased 7.9% to $78.8 billion, the Commerce Department's Bureau of Economic Analysis said on Wednesday.

Economists polled by Reuters had forecast the trade deficit would increase to $79.0 billion from the previously reported $73.1 billion in June.

President Joe Biden's administration has announced plans to impose steeper tariffs on imports of Chinese electric vehicles, batteries, solar products and other goods.

The government said last week a final determination will be made public in the "coming days." There are also fears of even higher tariffs on Chinese imports should former President Donald Trump return to the White House after the Nov. 5 election.

Trade has subtracted from gross domestic product for two straight quarters. Most of the imports are, however, likely to end up as inventory amid slowing domestic demand, which could blunt some of the impact on GDP.

Growth estimates for the third quarter are currently as high as a 2.7% annualized rate. The economy grew at a 3.0% pace in the April-June quarter.