(Reuters) .- The United States trade deficit was reduced in June due to a strong drop in imports of consumer goods, and the commercial gap with China was reduced to its lowest level in more than 21 years, the most recent evidence of the footprint that President Donald Trump is leaving in global trade with his wide tariffs to imported products.
Trump’s tariffs are leaving their brand in the US economy beyond trade, since a measure of activity in the vast services sector reached a stagnation rate in July, with companies that claim that the wave of new imports to imports is raising costs and making it difficult to plan business planning.
The total commercial deficit was reduced by 16% in June, at 60.2 billion dollars, the Office of Economic Analysis of the Department of Commerce reported on Tuesday.
Days after informing that the trade deficit of goods fell 10.8% to its lowest level since September 2023, the government said that the total deficit, including services, was also the smallest since then.
Exports of goods and services totaled 277.3 billion dollars, below the more than 278 billion May, while total imports were 337.5 billion, compared to 350.3 billion. Imports of consumer goods and supplies and industrial materials were the lowest since the middle of the Covid-19 Pandemia, while capital goods exports reached a historical maximum.
The reduced trade deficit contributed greatly to the rebound of the Gross Domestic Product (GDP) of the EU during the second quarter, reported last week, reversing the fall of the first quarter when imports were shot because consumers and companies advanced purchases to avoid the imposition of Trump tariffs.
The economy in the second quarter expanded at an annualized rate of 3% after contracting at a rate of 0.5% in the first three months of the year, but the main figure concealed underlying indications that the activity was weakening.
Last week, Trump, before his self -imposed deadline on August 1, issued a wave of notices informing dozens of commercial partners about the new import taxes that will be imposed on their exports to the US.
With tariff rates that range between 10% and 41% of imports to the US and that will enter into force on August 7, Yale Budget Lab estimates now that the US general average tariff rate has increased to 18.3%, the highest since 1934, from a range between 2% and 3% before Trump returned to the White House in January.
“Last week’s commercial announcement reduced uncertainty in politics, but companies that expected the tariffs to be only threats must now adapt to the reality that they arrived to stay,” said the financial market economist of Nationwide, Oren Klachkin.
“We believe that the negative impact of tariff rates will exceed any positive aspect derived from less political uncertainty.”
Trump tariffs reduce deficit with China
EU registered in June its lower commercial deficit with China since 2004, a proof of the effect that the tariffs of President Donald Trump are having in the reconfiguration of global trade.
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Commercial gap with China
A central element of Tuesday’s report was the most recent and pronounced drop in the US trade deficit with China, which collapsed approximately one third to 9.5 billion dollars in June, its lowest level since February 2004. Throughout five consecutive months of reductions, it has been reduced by 22.2 billion dollars, which is equivalent to a decrease of 70%.
The US and China commercial negotiators gathered last week in Sweden in the last round of dialogue on the commercial war that has intensified since Trump’s return.
Currently, EU imposes a 30% tariff on most Chinese imports, which has caused a strong fall in the traffic of goods from China. Imports from China dropped to 18.9 billion dollars, the lowest level since 2009.
Commercial negotiators have recommended that Trump extend the deadline of August 12 so that the current tariff rate expires and rises to more than 100%, level at which it was briefly earlier this year after a series of reciprocal increases by both parties.
“We are very close to an agreement,” Trump said Tuesday in an interview with CNBC. “We are going very well with China.”
The deficit with China was not the only one that was reduced. Amid a continuous stagnation in commercial conversations with Canada and strong tariffs imposed on cars, steel and aluminum, the commercial gap with the northern eu neighbor was the lowest in almost five years, with 1.3 billion dollars.
The trade deficit with Germany also decreased, located at 3.8 billion dollars, the lowest level in five years. But a couple of key commercial partners from Asia – Taiwán and Vietnam – recorded record surpluses.
Weakening of the service sector
The effects of tariffs showed signals last month also affecting the internal services sector, which represents approximately two thirds of the total economic activity.
The business activity stagnated unexpectedly in July, with few changes in orders and additional weakening in employment, even while the costs of inputs increased to the highest rate in almost three years, which highlights the persistent impact of political uncertainty around tariffs on companies.
The Index of Purchasing Managers (PMI) of the non -manufacturing sector of the Institute for Supply Management (ISM) fell to 50.1 last month from 50.8 in June. The economists surveyed by Reuters had planned that the PMI of Services would rise to 51.5. A PMI reading above 50 indicates growth in the services sector, which represents more than two thirds of the economy.
Employment measurement in report services descended to 46.4, the lowest level since March, compared to 47.2 in June. He has indicated contraction in four of the last five months, and this reading followed the surprisingly weak employment report published last week by the US Department of Labor.
Meanwhile, inflationary pressures continue to increase. The paid price index rose to 69.9, the highest level since October 2022, from 67.5 in June.
Until now, inflation has remained moderate largely because companies have been selling accumulated merchandise before the entry into force of import tariffs, but last week’s data showed that prices in some categories of goods, such as home furniture and recreational items, have begun to quickly rise.
The most moderate inflation in the services sector has helped maintain general inflation under control, but the ISM data questions whether that trend will continue or if it will further fell concerns about the possible appearance of a stagflation.
The respondents in the ISM survey often mentioned tariffs as an obstacle. “Commercial uncertainty is leading customers to reassess the viability of projects in certain sectors, resulting in some delays or cancellations,” said a respondent of the construction sector.
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