The U.S. trade deficit widened to a five-month high in July as imports hit a record high, the U.S. Commerce Department reported on Wednesday.
The goods and services deficit was 50.1 billion U.S. dollars in July, up from revised 45.7 billion dollars in the previous month and the highest level since February, the department said.
U.S. exports fell 1 percent to 211.1 billion dollars in July, while imports increased 0.9 percent to a record 261.2 billion dollars, suggesting trade could become a drag on U.S. economic growth in the third quarter of the year, according to the department.
In the first seven months of this year, the U.S. trade deficit increased 7 percent from the same period in 2017.
The U.S. trade deficit continued to rise despite the Trump administration vowed to shrink the deficit by renegotiating trade agreements and imposing tariffs on imports.
Raising tariffs against imports is not the right way to reduce the U.S. trade deficit, which is likely to increase further because of the planned U.S. fiscal stimulus, according to Maurice Obstfeld, chief economist with the International Monetary Fund (IMF).
"Trade policies don't have major quantitatively measurable impact on current account imbalances, which are mainly a macroeconomic phenomenon," Obstfeld said.
Based on current fiscal measures, the IMF estimated that the U.S. current account deficit, which is mainly made up of the trade deficit, would rise to 3.6 percent of gross domestic product (GDP) by 2020 from 2.4 percent in 2017.
