The U.S. Census Bureau, on July 29, announced that the goods trade deficit narrowed to $86 billion in June.
This compares to $96.6 billion in May.
"Big picture, risks around trade appear to be diminishing,” said Nationwide Financial Markets Economist Oren Klachkin, in a statement. “It’s plausible that US businesses and consumers will be able to navigate through the headwinds, assuming no other shock materializes. But there are non-negligible risks to consider, so we aren’t out of the woods entirely.”
Oren offered the following analysis.
Based on the announced tariff rates to date and a 15% minimum rate, we calculate the aggregate U.S. import tariff rate has climbed to around 20%. This marks a meaningful increase from last year and will likely drag on import volumes.
Some of the larger threats are now seemingly falling off the table but recently announced trade deals lack details, so trade-related uncertainties are not eliminated. And sectoral tariff threats, ongoing trade investigations, and the fate of the IEEPA tariffs pose risks to the outlook. About 60% of US imports are still not covered by a trade deal between the US administration and the respective trading partner.
Goods imports declined 4.2% in June on fairly broad-based declines, with some evidence that frontrunning may have diminished further. On the other side of the ledger, exports slipped 0.6% entirely on a sharp decline in industrial supplies shipments. Capital goods exports may have received a boost from Boeing aircraft deliveries. The full trade report, set to be published next week, will shed greater light on trading dynamics at the end of Q2.
