A report released on Friday determined that the United States trade deficit had decreased to the lowest point in over one year. The decrease had been caused by falling imports combined with rising exports. The information was released by the Department of Commerce. For starters, a trade deficit is used to define the difference between what a country exports and imports. The department said that the gap had decreased to $42.4 billion in August. Compared to the previous month, this was a decrease by $1.2 billion from what was recorded in July. While the value of imports stood at $237.7 billion, the department noted that the exports had a value of $195.3 billion. At the same time, the department noted that the trade deficit between the European Union and China was on the decrease for the month of August. An American economist from Deutsche Asset Management known as Josh Feinman had an explanation for the decline in the deficit. He noted that the world economy had strengthened with American exports been affected. At the same time, the weakening of the US dollar had an effect on the trade deficit. He further explained that whenever the global economy strengthens, exports from all over the world will experience some tailwinds.
The economist also cautioned Americans that the effects of Hurricane Harvey might have affected the data in one way or the other. However, the narrowing trade deficit in August will do nothing to the annual deficit that is on the rise every year. The commerce department further noted that the trade deficit had risen to 8.8 percent if the current figures are compared with figures from last year. This has further confirmed the fears by President Trump that the United States is not benefiting from global trade. He has always used trade deficit as a perfect example. This is why President Trump feels that the America-first policy will be crucial in shrinking this gap. He shifted the blame to negotiators and trade agreements. However, economists have always been wary of reading too much from the figures of trade deficit. They have also cautioned against monthly swings which at times gives the Trump administration some upper hand. What ordinary people don’t understand is that there are factors of macroeconomics that are linked to this phenomena. These factors include global trends related to investment and savings, the value of individual country currencies and the growth rates experienced in other countries.