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U.S. Exports Increased in June but So Did the U.S.-China Trade Deficit

The U.S. trade deficit fell sharply in June as exports increased to their highest level in 2-1/2 years, a positive development for the economy.

The Commerce Department said on Friday the trade gap decreased 5.9% to $43.6 billion, the lowest level since October 2016. May’s trade deficit was revised slightly down to $46.4 billion from the previously reported $46.5 billion.

Economists polled by Reuters had forecast the trade shortfall narrowing to $45.0 billion in June.

When adjusted for inflation, the trade deficit fell to $61.0 billion from $62.8 billion in May. Real goods exports surged to an all-time high of $126.9 billion in June, buoyed by record high petroleum exports.

The government reported last Friday that trade contributed almost two-tenths of a percentage point to the economy’s 2.6% annualized growth pace in the second quarter.

In June, exports of goods and services increased 1.2% to $194.4 billion, the highest level since December 2014. There were increases in exports of capital goods, food and motor vehicles. Exports to China fell 4.7%.

Imports of goods and services slipped 0.2% to $238.0 billion in June. There were decreases in imports of industrial supplies and materials. Imports of cell phones and other household goods fell $0.9 billion, accounting for the bulk of the $0.7 billion decrease in consumer goods imports.

Imports of goods from China increased 1.2%. The politically sensitive U.S.-China trade deficit increased 3.1% to $32.6 billion in June.