The US economy is going through a challenge. According to Business Insider, the US trade deficit significantly swelled in July, reaching its highest level in two years.

Data from the US Department of Commerce showed that in mid-summer, the trade deficit grew to $78.8 billion compared to the revised figure of $73 billion recorded in June. Experts attribute the rising trade deficit to import issues.

Economists had forecasted an increase in trade deficit to $79 billion from the previous $73.1 billion. While the July deficit was slightly below expectations, it was the largest since June 2022. Two years ago, the deficit surged to $81.2 billion.

The trade deficit might shrink a bit until the end of the quarter, but it will not change the picture. Therefore, net trade could reduce GDP growth in the third quarter of 2024 by 0.4%, Matthew Martin, a senior economist at Oxford Economics, estimates.

The increase in the trade deficit was driven by a 2.1% rise in import costs, reaching $345.4 billion, analysts explain. Imports had grown by 0.7%, totaling $338.3 billion in June. Besides, there was a significant rise in the import of capital goods, such as computer accessories, as well as industrial goods and materials.

In mid-summer, the cost of exports also logged growth of 0.5%, standing at $266.6 billion. This followed a 1.7% surge in June to $265.3 billion. However, the substantial rise in semiconductor exports and the growth in services exports did not upset the overall balance. Challenges in these categories were offset by a decline in the export of passenger cars and jewelry, namely diamonds.

The US Department of Commerce reported that the goods deficit increased to $103.1 billion in July from $97.5 billion in June, while the services surplus slipped to $24.3 billion from $24.5 billion.