Ho-hum, July Trade Deficit -$43.7B

Three hundred and sixty months of trade deficits has calloused financial markets with respect to reacting to this data point. So, this morning, not surprisingly there was little market reaction to another monthly goods and services trade deficit. For July exports totaled $194.4B and imports totaled $238.1B resulting in a -$43.7B deficit. Year-to-date the goods and services trade deficit is up 9.6% from 2016.

China remains on top as the country the U.S. runs the largest deficit ($31B) with Mexico not far behind in 4th place. The EU (weak EURO And Germany) and Japan (autos and capital goods) are 2 and 3. One closely watched area is imports less oil, and there we can find a bright spot as it subtracted only $3.1B, a far cry from the impacts of the past before U.S. shale oil and gas production and before OPEC introduced cuts to production to boost prices. We await the goods only deficit release, and expect it to show a move higher above $48B.

We are reaching an inflection point in trade policy with China and Mexico and may have prospect to consider an improvement in the terms of trade that will reduce America's trade imbalance benefiting workers and state and federal coffers. Equity markets and currency markets will signal this turn, weaker equities and stronger dollar (bad for U.S. exports unfortuneately). The stock prices for U.S. multinationals will be impacted if negotiations with Mexico and China continue as Pres Trump has threatened.

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