The US trade deficit narrowed more than expected in August, as businesses imported fewer goods against the backdrop of higher tariffs, which, if sustained, could be a potential tailwind for economic growth in the third quarter. 

However, a drop in imported consumer goods to levels last seen early in the COVID-19 pandemic and a decline in capital goods imports could signal slower consumer and business spending last quarter. The trade gap contracted 23.8% to US$59.6 billion, according to the latest data from the US Commerce Department’s Bureau of Economic Analysis and Census Bureau.

The report, which was initially scheduled for release on October 7 but was delayed because of the recently ended 43-day shutdown of the government. Overall imports decreased 5.1% to US$340.4 billion, with goods imports tumbling 6.6% to US$264.6 billion. The decline was led by a US$11.3 billion plunge in industrial supplies and materials, mostly reflecting a US$9.3 billion decrease in nonmonetary gold.

Capital goods imports slipped US$3.4 billion, with imports of computer accessories contracting by US$1.3 billion, while those of telecommunications equipment fell US$1.1 billion, but imports of computers increased US$2.3 billion. Food imports declined by US$1.6 billion. 

Exports edged up 0.1% to US$280.8 billion, reflecting services. Goods exports dropped 0.3% to US$179.0 billion, with shipments of consumer products sliding US$1.5 billion amid a US$1.2 billion decline in pharmaceutical preparations. Exports of industrial supplies and materials, which also include crude oil, eased US$0.6 billion.

They were pulled down by a US$1.1 billion decline in nonmonetary gold. Crude oil exports rose US$0.8 billion. Exports of motor vehicles, parts and engines went down US$0.4 billion, but shipments of capital goods increased US$2.4 billion to a record US$62.4 billion, boosted by computers. Analysts say this is good news for trade, showing that the US economy is seeing the benefits that the tariff system imposed by President Trump is working.