US deficit grew 15.6 per cent to a five-month high of $48.3 billion in August, hitting the lowest level since October 2012, on the back of a surge in imports from China and falling exports, data released by the US commerce department showed.
The sharp rise in August trade deficit was led by a 1.2 per cent increase in imports to $233.4 billion, led by a surge in cellphone imports from China, and a 2 per cent drop in exports to $185.1 billon.
The US has amassed a trade deficit of $531.6 billion so far this year, which shows an annual rate of growth of 4.6 per cent compared to last year's deficit of $508.3 billion.
US exports were hit by an ailing global economy and a strong dollar that weakened demand for American products and services, commerce department said.
Declining foreign demand for American products could further delay the Federal Reserve's resolve to hike rates and bring back normalcy in financial markets.
A rising dollar has made US goods less competitive in overseas markets, while on the other hand it dented commodity prices that were linked to the US currency.
Economists expect these trends to combine and push US trade deficit higher and make trade a drag on overall growth this year.
US imports from China increased by three per cent even as China's yuan currency depreciated sharply in recent months amid concerns of a possible crash of the Chinese economy.
Canada, the largest trading partner of the US, is in a recession, and China, the world's second-largest economy, is growing much more slowly and many emerging market economies are being battered by a plunge in commodity prices, all combining to mar the trade scenario.