(March 27): The U.S. trade deficit pulled back in January from the widest level in a decade as imports from China plunged, suggesting American companies had been rushing shipments the prior month to beat an expected tariff boost.
The deficit in goods and services narrowed to US$51.1 billion, the Commerce Department said Wednesday, smaller than the median estimate of economists. Imports fell 2.6%, while exports rose 0.9%. The merchandise-trade gap with China — the target of President Donald Trump’s trade war — shrank to US$33.2 billion as imports from the nation dropped 12.3%.
Levies on Chinese goods had been set to increase on Jan 1 before Trump put them on hold, while trying to work out an accord with China over the trade war, while the Lunar New Year holiday also tends to cause swings in the figures early in the calendar year.
Trump may yet have difficulty achieving his goal of a sustainably lower deficit as slowing global growth and a strong dollar weigh on exports, while American demand continues to support shipments of imported goods.
U.S. and Chinese officials resume talks this week on a deal that could be a step toward economic peace, with signs that both sides want to avoid any escalation of the eight-month trade war. Trump’s top trade negotiator is due to visit Beijing on Thursday and Friday, while China’s lead official plans to travel to Washington the following week.
The January trade data compared with a US$59.9 billion deficit in December that was a 10-year high and a median estimate of economists surveyed by Bloomberg calling for a deficit of US$57 billion. The trade deficit widened last year to US$621 billion, also a 10-year high, as tax cuts boosted domestic demand for imports and a strong dollar weighed on exports.
Wednesday’s figures showed the deficit in goods narrowed to US$73.3 billion, while the surplus in services edged up to US$22.1 billion. The report was delayed three weeks from the original date because of the government shutdown earlier this year, and the Commerce Department canceled the release of the preliminary January figures on merchandise trade.
Overall exports increased to US$207.3 billion, with gains in cars, trucks, jewelry and consumer goods. Aircraft shipments decreased. Imports decreased to a seven-month low of US$258.5 billion, dragged down by computer accessories, semiconductors and oil.
Soybean exports more than quadrupled to US$1.2 billion, which may reflect increased purchases by China after the country pledged to buy more of the crop. At the same time, overall exports to China fell to US$7.1 billion, the lowest since 2010 on an unadjusted basis.
There are fresh signs cooling global growth may weigh on exports of American-made goods. This month, the Organization for Economic Cooperation and Development cut its 2019 global growth forecast to 3.3%, from 3.5%, China lowered its growth target, and the European Central Bank slashed its projection for the region.
On an unadjusted basis, the merchandise trade deficits with Mexico, Canada and Europe all narrowed. After eliminating the influence of prices, which renders the numbers used to calculate gross domestic product, the goods trade deficit narrowed to US$83.8 billion, from US$91.7 billion in the prior month. The real petroleum gap widened as exports decreased slightly; excluding petroleum, the goods trade shortfall narrowed to US$70.7 billion from US$78.6 billion. The average price for crude oil imports fell to US$42.59 per barrel, the lowest since December 2016.