The U.S. trade deficit increased to a five-month high in July as exports of soybeans and civilian aircraft declined and imports hit a record high, suggesting that trade could be a drag on economic growth in the third quarter.

The increase was the biggest monthly widening since 2015.

The Commerce Department said on Wednesday the trade gap jumped 9.5 percent to $50.1 billion, widening for a second straight month. Data for June was revised to show the trade deficit rising to $45.7 billion, instead of the previously reported $46.3 billion.

The politically sensitive goods trade deficit with China surged 10 percent to a record $36.8 billion.

Economists polled by Reuters had forecast the overall trade deficit swelling to $50.3 billion in July. The trade gap continues to widen despite the Trump administration’s “America First” policies, which have left the United States embroiled in tit-for-tat tariffs with the European Union, Canada and Mexico as well as an escalating trade war with China.

President Donald Trump has defended the duties on steel, aluminum imports and a range of Chinese goods as necessary to protect American industries from what he says is unfair foreign competition.

The administration says eliminating the trade deficit will put the economy on a sustainable path of faster growth, an argument that has been dismissed by economists as flawed given constraints such as low productivity and slow population growth.

The United States and China have slapped retaliatory tariffs on a combined $100 billion of products since early July, with more in the pipeline, posing risks to both domestic and global economic growth.

The trade gap narrowed in April and May as farmers front-loaded soybean exports to China before Beijing’s retaliatory tariffs came into effect in early July……more here