Good News: U.S. Deficit Highest For Month Of June In 18 Years

The U.S. trade deficit for June, the most recent data available, was the highest in at least 18 years, when comparing it to the other months of June dating back to 2002.

And that’s good news.

There are at least three factors at play.

First, while overall U.S. trade fell 17.47% when compared to the previous June, that is a far cry better than the startling 29.83% decline in May when compared to May of 2019.

So, some of that increased deficit — exports minus imports — is U.S. trade clawing its way back. That’s a good thing, even with a 17.47% decline from the previous June.

In fact, when comparing U.S. trade in June to the previous month, May, it increased 11.86%, with exports increasing more rapidly than imports, 15.87% to 9.64%. (The deficit still increased slightly, to $74.69 billion, given the smaller base of exports.)

Asian imports and then there’s Mexico

Second, four of the five top 20 U.S. trade partners whose trade grew in June when compared to the previous June are in Asia, with Switzerland the lone exception. That usually means one thing: Increasing imports. That offers hope, even if it’s just a glimmer, that consumers and businesses might start buying again.

The list of those four Asian nations does not include China, once again the top U.S. trade partner, though its U.S. trade was down a relatively slight 2.60%.

The four:

1. Taiwan, up 4.30%;
2. Vietnam, up 20.26%;
3. Malaysia, up 5.63%;
4. Thailand, up 2.89%.

In fact, the U.S. deficit with China and Vietnam increased more than $1 billion when compared to the previous June, up $1.44 billion and $1,05 billion, respectively.

The far bigger increase was with a trading partner far closer to home: Mexico.

The U.S. deficit with Mexico increased $5.53 billion from the previous month. But that is because U.S. trade with Mexico swooned so severely in April and May, dropping the deficit in those two months. In fact, U.S. trade with Mexico increased 63.96% when compared to May, though it remained down 18.56% from the previous June.

There’s a different story with Switzerland, the fifth nation among the top 20 to register an increase in June. It is the source of record gold imports, particularly in May. Gold is seen as a hedge in uncertain economic times and is trading at or near record highs.

The top 25, incidentally, accounted for more than 85% of all U.S. trade in June with the top three — China, Mexico and Canada, in that order — accounting for better than 45% of the total.

June not a big deficit month

Third, June does not tend to be a year with a large trade deficit. Deficits tend to increase as Christmas approaches and then tails off.

Nevertheless, the deficit, while exceptionally high for a month of June, was even high when compared against all months — the highest in eight months, since last October.

Overall, U.S. trade for June totaled $284.77 billion, an increase over April and May.

Three consecutive months under $300 billion

It was the first time since December 2015 through February 2016 that U.S. trade had fallen below $300 billion three consecutive months.

You can find the ranking of the top 10 U.S. trade partners here, with the ability to check by the most recent month, year-to date and 2019.