US trade deficit falls to seven-month low

Shipping containers sit at the ports of Los Angeles and Long Beach, California in this aerial photo taken February 6, 2015. — Reuters pic
Shipping containers sit at the ports of Los Angeles and Long Beach, California in this aerial photo taken February 6, 2015. — Reuters pic

WASHINGTON, June 6 — The US trade deficit fell to a seven-month low in April as exports rose to a record high, lifted by an increase in shipments of industrial materials and soybeans.

The Commerce Department said on Wednesday the trade gap dropped 2.1 per cent to US$46.2 billion, the smallest since September. Data for March was revised to show the trade deficit falling to US$47.2 billion, instead of the previously reported US$49.0 billion.

The government also revised trade data going back to 2010. Economists polled by Reuters had forecast the trade deficit unchanged at US$49 billion in April.

When adjusted for inflation, the trade gap narrowed to US$77.5 billion from US$78.2 billion in March. The so-called real trade deficit is below its US$82.5 billion average in the first quarter.

If the trend in the real trade deficit is maintained, trade could contribute to gross domestic product in the second quarter after having a neutral impact in the January-March period.

Strong data ranging from manufacturing to consumer spending and the labour market have led the Federal Reserve Bank of Atlanta to estimate that economic growth in the second quarter will top a 4.0 per cent annualized rate. The economy grew at a 2.2 per cent pace in the first quarter.

But a protectionist trade policy being pursued by President Donald Trump poses a threat to the otherwise rosy economic outlook. Trump in March announced tariffs for steel and aluminium imports to protect domestic industries from what he says is unfair competition from foreign producers.

Last week, Trump extended the duties to steel and aluminium imports from Canada, Mexico and the European Union. Mexico has retaliated with measures targeting a wide range of US farm and industrial products. Canada has said it would slap tariffs on imports from the United States, including whiskey, orange juice, steel, aluminium and other products.

A trade war is also looming with China. Washington and Beijing have threatened tit-for-tat tariffs on goods worth up to US$150 billion each. Trump claims the United States is being taken advantage of by its trading partners, but economists warn that tariffs will hobble the economy, raising prices and destroying jobs for Americans.

Economists say that tariffs will do little to shrink the trade deficit, partly because of the dollar’s status as the global reserve currency and the low US savings rate, including a fiscal deficit that has been blown up by a US$1.5 trillion tax cut package.

The politically sensitive goods trade deficit with China increased 8.1 per cent to US$28.0 billion in April. The deficit with Mexico narrowed 29.8 per cent to US$5.7 billion in April. The United States had a US$0.8 billion goods trade deficit with Canada in April.

In April, exports of goods and services rose 0.3 per cent to a record US$211.2 billion. Exports were supported by a US$1.3 billion increase in deliveries of industrial supplies and materials such as fuel oil and petroleum products.

Exports of industrial supplies and materials were the highest on record in April. Soybean exports increased US$0.3 billion and corn shipments also rose by a similar amount. But exports of commercial aircraft tumbled US$2.8 billion.

Exports to China dropped 17.1 per cent in April.

Imports of goods and services slipped 0.2 per cent to US$257.4 billion in April. Imports of consumer goods dropped US$2.8 billion, weighed by a US$2.2 billion decline in imports of cellphones and other household goods. Motor vehicle imports fell US$1.0 billion.

Crude oil imports rose US$1.0 billion in April. Imports from China were unchanged in April. — Reuters