US economy shows signs of strains

Ever since U.S. President Donald Trump slapped tariffs on Chinese goods last year, he has been hitting on the trade deficit between China and the U.S. However, instead of narrowing the gap, May data reveal that the deficit is wider.

As Business Insider writes in the article Instead Of Narrowing, The China-U.S. Trade Deficit Is Wider, according to a report released by the U.S. Commerce Department on Wednesday, the China-U.S. trade deficit increased by over eight percent throughout May. For April, the balance stood at $51.2 billion but by the next month, the figures grew to $55.5 billion.

Economic analysts noted that the figures may be a huge thorn in the neck of Trump since he has been using the trade deficit as a way of beating down on the Chinese government and its trade practices. The Trump administration questioned why the trade deficit was huge all these years. The American leader has been demanding for the figures to be narrowed but it appears that Trump's plans backfired since the numbers didn't improve and instead ballooned.

The data for May also suggests that things changed largely after trade talks between Beijing and Washington fell out that month following the White House accusing the Chinese government of reneging on trade terms. Analysts are expecting June figures to be somehow more positive since Trump and Chinese President Xi Jinping agreed at the G20 Summit to revive trade talks. While a trade deal is a long ways off, the revival of negotiations could encourage hope among investors and traders.

Aside from the trade deficit narrowing further, economic figures in the United States also showed small signs of a slowdown, suggesting that there is something wrong. For Moody Analytics Chief Economist Mark Zandi, strains on the U.S. economy will be "more evident going forward." In an interview with Yahoo Finance's The First Trade, Zandi noted that the China-U.S. trade war is "weighing on the economy." He added that the trade war created uncertainties not just in Chinese markets but also among American markets and these resulted in a slowdown in growth.

The U.S. workforce, in particular, showed signs of difficulties amid the trade war. The labor sector showed a sharp decrease in job additions while the manufacturing sector also slowed down in production rates. Zandi said he thinks the trade truce that Xi and Trump agreed on at G20 won't change much of the already shaken and weakening faith of giant American brands. He added that the trend will continue unless the White House makes it clear which products will have tariffs and which will not. Companies are demanding clearer details regarding the trade truce but both Beijing and Washington have yet to explain their part in the agreement to hold off additional tariffs.