U.S. trade deficit rises to near nine-and-a-half-year high in February

WASHINGTON (Reuters) – The U.S. trade deficit increased to a near 9-1/2-year high in February, with both imports and exports rising to record highs in a sign of strong domestic and global demand.

News on Thursday of the worsening trade deficit came as the United States and China were embroiled in tit-for-tat tariffs which escalated trade war fears and rattled financial markets.

President Donald Trump’s administration is pursuing import duties to eradicate the deficit and protect domestic industries from what he says is unfair foreign competition. But economists say the trade penalties will not reverse the deficit.

“The U.S. continues to expand faster than most other industrialized countries, so it should not surprise anyone that the trade deficit is worsening,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.”Tariffs may sound like a good way to change the pattern of trade, but they tend to raise prices rather than modify the trade fundamentals.”

The Commerce Department said the trade gap increased 1.6 percent to $57.6 billion in February, the highest level since October 2008. The deficit has now increased for six straight months. Most of the rise in the trade deficit in February reflected commodity price increases.

Economists polled by Reuters had forecast the trade gap widening to $56.8 billion in February. The goods trade deficit was the highest since July 2008 and the surplus on services was the lowest since December 2012.

While the politically sensitive goods trade deficit with China fell 18.6 percent to $29.3 billion in February, it has increased 20.2 percent so far this year.