Trade Deficit in Goods Surges To Highest in Over Two Years

Foreign goods producers sold far more into the American market than foreign consumers purchased in July, driving the U.S. trade deficit in goods to the highest level since May 2022.

The U.S. trade deficit in goods rose 6.3 percent in July to $102.7 billion, according to the Commerce Department’s first estimate released Thursday.

This was higher than the $98 billion forecast. The June deficit was $96.9 billion.

The rise was driven by a surge in imports, which rose $6.1 billion to $275.6 billion. Exports were unchanged at $172.9 billion.

Incomes are derived from spending. When Americans spend their income to purchase foreign products, American workers receive lower incomes. This so-called income “leakage” must be offset by borrowing, typically by deficit spending by the federal government, or by an economic contraction.

So the larger trade deficit is likely to feed into a larger budget deficit. The Harris campaign has said it opposes Donald Trump’s proposal to reduce deficits by imposing higher tariffs on imported goods, which effectively means that Kamala Harris would need to support higher budget deficits or a contracting economy.