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US trade deficit reached $54 billion in September. According to analysts from Wells Fargo, a stronger dollar and trade tensions likely weighed on export growth. They noted that imports remained robust, and they look for trade to continue to be a drag on GDP growth.

Key Quotes:  

“Data released today showed that the trade deficit widened to $54 billion in September, as capital and consumer goods imports posted solid gains while trade-related export distortions continued to fade into the background. Exports and imports each rose 1.5% over the month, but the dollar value of imports exceeded exports, pushing the trade balance further into negative territory.”

“On the export side of the equation, the continued rebound in the dollar is making exports relatively more expensive for our foreign trading partners, with the greenback up roughly 4.5% on a trade-weighted basis year-to-date.”

“Today’s widening in the trade deficit largely confirms what we already knew surrounding the state of international trade in the third quarter. Last week’s Q3 GDP release showed that net exports were a 1.8 percentage point drag on headline GDP growth. This more than reversed the 1.2 percentage point boost in Q2, the largest contribution since 2013, largely due to tariff-related distortions. On the export side of the equation, a stronger dollar, softer global growth and ongoing trade policy uncertainty will likely restrain a more rapid pace of growth in coming quarters. With little sign of these headwinds abating anytime soon, we look for trade to be a modest drag on GDP growth in the fourth quarter and throughout 2019.”