As Washington braces itself for a battle over the recently-finalized Trans-Pacific Partnership, the Commerce Department on Tuesday reported that the US trade deficit grew by $6.5 billion to $48.3 billion in August—the sixth highest monthly sum since the start of the Great Recession.
The increase in the deficit happened in spite of record low spending in the US on petroleum and a record high value of net American service exports, Commerce noted. It was buoyed by record high spending on US services in the rest of the world.
The United States posted higher trade deficits with both TPP members and a major country looking to joint the pact.
Deficits with Canada and Mexico grew by about $188 million and $1.5 billion. The US deficit with Japan declined slightly by $186 million.
South Korea–not a party to the TPP but a country that has expressed significant interest in joining--also saw its trade surplus vis-a-vis the United States grow in August by $490 million.
Combined, the US had a trade deficit of $15.3 billion with all four Pacific Rim countries.
Exacerbating the trade deficit are economic woes in Canada and China—the two foremost destinations for American exports.
China this summer experienced significant financial instability that has reverberated beyond its borders, and last month a report indicated it would experience a low rate of economic growth not seen since 2008.
Canada, meanwhile, has experienced months of economic contraction this year caused primarily by falling oil prices. Its economy started expanding in the summer, but a Tuesday report about its own trade deficits has raised doubts that Canadians can expect smoother sailing over the coming months.
Between 2004 and October 2008, amid the last major economic bubble, the average US monthly trade deficit was about $58.8 billion. Since then, it has fallen to about $41.4 billion.
President Obama this week reacted to the finalization of the Trans-Pacific Partnership by saying the deal will give “our workers the fair shot at success they deserve.”
After the Korea-US Free Trade Agreement was signed in 2011, he claimed the deal would “increase exports of American goods by $10 billion to $11 billion. Since 2012, exports to South Korea have increased by less than $1 billion, while US imports of Korean goods have grown by $12 billion.
Yesterday, many lawmakers, including staunch supporters of sweeping free trade agreements, reacted negatively to the news that the TPP was finalized. Republican senators, in particular, have voiced their displeasure with the agreement’s refusal to grant tobacco companies the same rights other corporations will be handed under the deal.
