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May 9, 2019

US trade deficit edges up, even as Americans buy less from China

By CNN BUSINESS

The US trade deficit edged up by 1.5% in March, but the gap with China continues to narrow amid an ongoing trade dispute.

Seeking to close that gap even futher, President Donald Trump is set to raise tariffs on some Chinese goods Friday.

Overall, the US monthly trade deficit in goods and services grew to $50 billion, the Census Bureau reported Thursday. American companies imported more from abroad than they exported, a trend driven by the strong economy.

Imports rose 1.1%, reflecting an increase in purchases of industrial supplies and materials. But Americans bought fewer consumer goods including cell phones, which are largely produced in China. Exports also rose at nearly the same pace, driven by shipments of US fuel and soybeans.

The goods trade deficit with China decreased $1.9 billion to $28.3 billion in March, as imports continued to fall.

The gap with China is down about 12% compared to the first three months of last year -- before Trump began imposing tariffs on Chinese goods in an effort to pressure Beijing to come to the negotiating table.

The tariffs make items made in China more expensive for American businesses, creating an incentive for US importers to buy goods elsewhere. Some companies have began shifting their supply chains to avoid paying the tariffs, but that process can take time. In the meantime, importers have been absorbing some of the cost or passing it along to consumers.

Trump has repeatedly claimed that China pays the tariffs. Although some Chinese companies may choose to eat some of the cost in order to remain competitive in the US market, several recent research papers show that American consumers and producers take on most of the burden.

Chinese negotiators have arrived in Washington to continue trade talks. But on Monday, US trade officials said Beijing reneged on previous agreements over the weekend and confirmed that Trump would escalate tariffs on $200 billion of Chinese goods to 25% from 10% starting Friday.

The President has also threatened to add new tariffs to the Chinese goods not currently taxed. That move could hit a long list of consumer goods, including iPhones, toys and footwear, which have so far escaped the tariffs.

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