US trade deficit hits nearly 2-year low in June; China gap plunges
The overall trade gap narrowed 16 per cent in June to US$60.2 billion, the Commerce Department's Bureau of Economic Analysis said on Tuesday (Aug 5). Days after reporting that the goods trade deficit tumbled 10.8 per cent to its lowest since September 2023, the government said the full deficit including services also was its narrowest since then.
Exports of goods and services totalled US$277.3 billion, down from more than US$278 billion in May, while total imports were US$337.5 billion, down from US$350.3 billion.
The diminished trade deficit contributed heavily to the rebound in US gross domestic product during the second quarter, reported last week, reversing a drag in the first quarter when imports had surged as consumers and businesses front-loaded purchases to beat the imposition of Trump's tariffs.
The economy in the second quarter expanded at a 3 per cent annualised rate after contracting at a 0.5 per cent rate in the first three months of the year, but the headline figure masked underlying indications that activity was weakening.
Last week Trump, ahead of a self-imposed deadline of Aug 1, issued a barrage of notices informing scores of trading partners of higher import taxes set to be imposed on their goods exports to the US.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
With tariff rates ranging from 10 to 41 per cent on imports to the US set to kick in on Aug 7, the Budget Lab at Yale now estimates the average overall US tariff rate has shot up to 18.3 per cent, the highest since 1934, from between 2 per cent and 3 per cent before Trump returned to the White House in January.
China trade gap
A centrepiece of Tuesday's report was the latest steep drop in the US trade deficit with China, which tumbled by roughly a third to US$9.5 billion in June to its narrowest since February 2004. Over five consecutive months of declines, it has narrowed by US$22.2 billion – a 70 per cent reduction.
US and China trade negotiators met last week in Sweden in the latest round of engagement over the trade war that has intensified since Trump's return. The US currently imposes a 30 per cent tariff on most Chinese imports, which has fuelled a steep drop off in inbound goods traffic from China. Imports from China dropped to US$18.9 billion, the lowest since 2009.
The trade negotiators have recommended that Trump extend an Aug 12 deadline for the current tariff rate to expire and snap back to more than 100 per cent, where it had briefly been earlier this year after a round of tit-for-tat increases by both sides.
'We're getting very close to a deal,' Trump said on Tuesday in an interview on CNBC. 'We're getting along with China very well.' REUTERS
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Times
22 minutes ago
- Business Times
Malaysia's semiconductor players befuddled, tech stocks tumble on Trump's 100% tariff threat against chips
[KUALA LUMPUR] Malaysian tech stocks underwent a broad sell off on Thursday (Aug 7), and the country's giant semiconductor sector was jittery as it struggled to process US President Donald Trump's plan to impose a 100 per cent tariff on imported semiconductor chips. The proposed tariffs, targeting all semiconductors produced outside the US or by such companies with no plans to set up plants on American soil, triggered declines in 71 technology counters on Bursa Malaysia. Wong Siew Hai, president of the Malaysia Semiconductor Industry Association, said the abrupt announcement has created confusion, and that industry players are taking a wait-and-see approach, including calling a pause on their investment plans. He told The Business Times: 'We can't say more for now; we will have to wait for more details from Washington on how this tariff will be implemented.' Last year, Malaysia exported nearly RM120 billion (S$36.4 billion) in electrical and electronics products to the US, accounting for a fifth of its total electrical and electronics exports. Semiconductor exports alone amounted to RM60.6 billion, or about 20 per cent of Malaysia's total chip shipments. Among the hardest hit were Malaysian Pacific Industries. Its share price fell 20 sen or close to 1 per cent, to RM20.30 at the close of trading on Thursday. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up The share prices of D&O Green Technologies and KESM Industries, also one of the top losers, dropped 6 sen to RM1.04 and RM2.58, respectively. The Bursa Malaysia Technology Index, comprising 49 stocks, rose 0.2 per cent to 52.27 at Thursday's close, but the index remained down 0.7 per cent for the week; it has fallen 19.7 per cent since the start of the year. On Thursday, the top five constituents of the technology index turned in mixed performances. While Malaysian Pacific Industries, Frontken Corporation and Zetrix AI (formerly MY E.G. Services) also finished the day lower, Vitrox Corporation and Inari Amertron rebounded in the second half of trading, after logging declines earlier in the day. The falls followed Trump's announcement from the Oval Office on Wednesday that the tariff would apply to 'all chips and semiconductors coming into the US', unless companies were building or planning to build facilities within the US. He added that firms falsely claiming to invest in the US would face retroactive tariffs. The announcement was the latest escalation in Washington's push to rebuild its domestic chip capacity and lower the country's dependence on foreign supply chains. Under this drive, the Department of Commerce initiated an investigation in April to assess the risks posed to national security from imports of semiconductors and related equipment. Putrajaya warns of economic blow Malaysia's Investment, Trade and Industry Minister Tengku Zafrul Aziz said: 'Malaysia risks losing a key market in the United States if our products become less competitive due to the imposition of such tariffs.' REUTERS Malaysia's Investment, Trade and Industry minister Tengku Zafrul Aziz warned that the country could suffer a major blow if its semiconductor exports to the US become subject to such steep tariffs. 'Malaysia risks losing a key market in the United States if our products become less competitive due to the imposition of such tariffs,' he said in Parliament on Thursday. He noted, however, that the US has yet to detail the implementation mechanism and that Malaysia's exports remain exempt from the tax for now. Still, the status is 'subject to review', and may shift with future US trade decisions. Tengku Zafrul said the government has stepped up engagement with Washington and is working closely with Bank Negara Malaysia to assess the potential economic impact. The Ministry of Investment, Trade and Industry is also stepping up its outreach to the country's major exporters and related industries, and also urging companies to diversify their export markets to reduce their reliance on the US. The US' 19 per cent tariff on Malaysian imports, effective Aug 7, is a reduction from the previous rate of 24 per cent. The minister noted earlier that tariffs on pharmaceutical products and semiconductors remain at zero per cent, and that Washington has signalled its readiness to offer more exemptions in ongoing talks. Malaysia is the world's sixth-largest semiconductor exporter. Its electrical and electronics and chip sectors employ more than 72,000 skilled workers, and are supported by over 7,200 mostly small and medium-sized local suppliers. These industries are also growth engines for the automotive, medical device, renewable energy, aerospace and digital sectors, added Tengku Zafrul. Dampening future demand Analysts have warned that the proposed tariffs could disrupt global supply chains and drive up production costs. These higher costs would likely be passed on to consumers, ultimately dampening demand. In a note on Thursday, TA Securities said that it anticipates more conditional exemptions to be announced over time, given the complexity and interdependence of the global semiconductor supply chain. It said in a report: 'It would be extremely difficult for the US to fully repatriate the semiconductor value chain in the near term, as building a self-sufficient ecosystem would take decades.' Despite the uncertainty, global demand for semiconductor manufacturing equipment remains robust. Citing data from industry association Semiconductor Equipment and Materials International (SEMI), TA Securities expects global sales by equipment makers to reach a record US$125.5 billion in 2025, and US$138.1 billion in 2026. Sales of wafer-fabrication equipment are forecast to rise 6.2 per cent in 2025 and 10.2 per cent in 2026, reaching RM516 billion. Demand for assembly, packaging and testing equipment is also projected to grow as chips become more complex. Jeremy Goh, head of research at CGS International, said firms that are in Malaysia's outsourced semiconductor assembly and test market, along with those in automated test equipment and electronics manufacturing services would be directly hit by steep tariffs, because of their deep exposure to consumer electronics and automotive clients. He flagged two companies in particular – Vitrox and Pentamaster, which derived 14 per cent and 7 per cent of their revenue, respectively, from US-bound shipments in 2024.
Straits Times
22 minutes ago
- Straits Times
STI up 0.7%, in line with regional gains despite US tariff kick-off
Sign up now: Get ST's newsletters delivered to your inbox Across the broader market, gainers outnumber losers 320 to 201. SINGAPORE – Gains across regional markets gave investors all the excuse they needed to push local shares up for the fourth straight day despite continuing unease over tariffs. The heady sentiment left the benchmark Straits Times Index (STI) up 0.7 per cent or 30.45 points at 4,258.15 on Aug 7 with gainers outstripping losers 320 to 201 on robust trade of two billion securities worth $2.1 billion. The results were largely reflected around the region. Malaysian shares added 0.4 per cent, Japan's Nikkei 225 and Hong Kong's Hang Seng both put on 0.7 per cent and the Kospi in South Korea advanced 0.9 per cent. Australia was the outlier, dipping 0.2 per cent but still at historic levels. The regional advances followed a positive session on Wall Street overnight, where an Apple rally helped push the Nasdaq up 1.2 per cent to a near-record. The S&P 500 added 0.7 per cent while the Dow industrials edged ahead 0.2 per cent. The gains came despite the higher tariff rates imposed by US President Donald Trump taking effect on dozens of trading partners. Mr Vishnu Varathan from Mizuho Securities noted: 'The cognitive dissonance involved in the Apple-led tech rally firing up Nasdaq bulls on one hand and Trump's 100 per cent tariffs on semiconductors is remarkable.' Top stories Swipe. Select. Stay informed. Singapore Liquor licences for F&B, nightlife venues extended to 4am in Boat Quay, Clarke Quay Singapore Some ageing condos in Singapore struggle with failing infrastructure, inadequate sinking funds Singapore CDC, SG60 vouchers listed on e-commerce platforms will be taken down: CDC Singapore Fine for man who damaged PAP campaign materials on GE2025 Polling Day Singapore Jail for driver who drove over leg of special needs woman in accident on church driveway Singapore Wastewater overflow in Bedok and Chai Chee due to choked sewer at BTO worksite: PUB Singapore Ex-Hyflux director fined over firm's failure to disclose Tuaspring info Business S'pore firm looks to buy SMEs lacking successors, launches CEO training programme to foster renewal Meanwhile, Yangzijiang Shipbuilding was the STI's top gainer for a second straight day, climbing 8 per cent to $2.84. The rally came after the Chinese firm reported that first-half net profit surged 36.7 per cent to a record high. The stock rocketed up around 11 per cent in early trade to hit $2.92, its highest level since February. UOB led the STI decliners, falling 1.8 per cent to $35.81, after reporting a 6 per cent year-on-year drop in second-quarter earnings that fell below analyst estimates.
CNA
22 minutes ago
- CNA
CNA Explains: Why India buys Russian oil and will it yield to Trump's tariff pressure?
SINGAPORE: US President Donald Trump on Wednesday (Aug 6) announced an additional 25 per cent tariff on India over its purchase of Russian oil, bringing the combined levy to 50 per cent. This brought ties between India and the US to a new low. CNA looks at how India's Russian oil imports have grown in recent years, why this is an issue for Trump and the potential impact of the higher tariffs. Why does India import oil from Russia? As one of the world's largest oil consumers, India relies on foreign suppliers for more than 85 per cent of its oil needs. The country traditionally relied on the Middle East for its oil supply. However, the outbreak of the Ukraine war in 2022 and Western sanctions on Russia presented an opportunity for New Delhi to obtain discounted crude from Moscow. The cheaper oil has reduced costs for Indian refiners. In 2024, Russia accounted for nearly 36 per cent of India's total crude oil imports, up from roughly 2 per cent before the war, according to data released by the country's commerce ministry. The price advantage of Russian oil has narrowed over the years, dropping from around 14 per cent in the 2023 to 2024 financial year to about 7 per cent in 2024 to 2025. But it remains economically attractive for India. Why is the US concerned? The US has said that India's purchase of Russian crude is fuelling Moscow's war effort in Ukraine. Although Ukraine's Western allies have repeatedly sought to hobble Russia's export earnings, Moscow has been able to redirect energy sales from Europe to other countries, including India and China. Apart from geopolitical reasons, there are economic considerations. Trump's trade advisor Peter Navarro told reporters on Wednesday that India was the 'maharaja of tariffs'. New Delhi's high tariffs and non-tariff barriers meant the US sends 'a lot of dollars overseas to India to buy their products in an unfair trade environment', he said. 'India then uses American dollars to buy Russian oil.' How will Trump's latest tariffs affect India? Indian exporters warned that additional US tariffs risked making businesses "not viable", especially for small- to medium-sized enterprises where profit margins are already thin. "The 50 per cent reciprocal tariff effectively imposes a cost burden, placing our exporters at a 30 to 35 per cent competitive disadvantage compared to peers from countries with (a) lesser reciprocal tariff," said S C Ralhan, president of the Federation of Indian Export Organisations. He added that the tariffs were 'a severe setback' for India's exports. Manoranjan Sharma, the chief economist at Indian credit rating agency Infomerics Ratings, told Reuters that the tariffs would hit India's gross domestic product and affect employment to a certain extent. But while the tariffs were concerning, he said there was no reason for alarm as India is 'a largely domestically driven economy', with exports accounting for about 18 per cent of India's GDP. Sharing that view, Ranjeet Mehta, secretary-general of India's PHD Chamber of Commerce and Industry, said that the Indian economy is 'very resilient and very robust'. 'This is an opportunity to diversify to other markets of the world,' she told Reuters. 'I think that this is the time to really realign the supply chain and focus on economies other than the US for the time being. However, we request, we urge both the government of India and the government of the US to engage in a dialogue so that these disruptions can be sorted out." Can India diversify its oil sources? India's foreign ministry said on Monday that it began importing from Russia because traditional oil supplies were diverted to Europe after the outbreak of the Ukraine war. India still sources crude oil from parts of the Middle East, such as Iraq, Saudi Arabia and the United Arab Emirates. The region accounted for 45 per cent of the country's total imports in 2024. According to Minister of Petroleum and Natural Gas Hardeep Singh Puri, India has diversified its sources of supply to about 40 countries. More supply is coming onto the market from Guyana, Brazil and Canada, he added. So India could find other suppliers to meet its energy needs relatively easily. The question is cost - as none of India's other alternatives offer the same price advantage as Russia. What next for India? The Indian government on Wednesday called the additional tariffs 'unfortunate'. 'We reiterate that these actions are unfair, unjustified and unreasonable,' foreign ministry spokesman Randhir Jaiswal said in a statement, adding that India would take all actions necessary to protect its interests. Jaiswal said India has already made its stand clear that the country's imports were based on market factors and were part of an overall objective of ensuring energy security for its 1.4 billion people. One analyst said the new tariffs put Prime Minister Narendra Modi in a bind. "India is now in a trap - because of Trump's pressure, Modi will reduce India's oil purchases from Russia, but he cannot publicly admit to doing so for fear of looking like he's surrendering to Trump's blackmail," said Ashley Tellis at Washington's Carnegie Endowment for International Peace. Reuters previously reported that India's state refiners had paused Russian oil purchases. Can the US do the same to China? China is the biggest importer of Russian crude ahead of India. Türkiye is also a major buyer, and Trump has warned that countries purchasing Russian exports could face sanctions if Moscow fails to reach a peace deal with Ukraine. But Trump could find it difficult to impose such tariffs on Beijing, Dr Susan Stone told CNA. Dr Stone, Credit Union SA Chair of Economics at the University of South Australia, noted that US trade with China was five times larger than its trade with India. 'China's been showing its willingness to retaliate, and of course, it has the economic heft behind it to make those retaliatory measures more painful, maybe than other countries to the US,' she said. 'So it'll be interesting to see if the US threatens China, and then if it does, how that plays out.' As part of a negotiating period with Beijing, Trump has placed 30 per cent tariffs on goods from China, a rate that is lower than the combined import taxes that India faces. Ajay Srivastava, a former Indian trade official, told AP that Trump's decision on India was 'hypocritical' given that China buys more Russian oil. 'Washington avoids targeting Beijing because of China's leverage over critical minerals, which are vital for US defence and technology,' he said.
