U.S. Trade Gap Widens to Post-Recession HighBy
Exports fell in January from prior month; imports unchanged
Trump has said deficit shows U.S. being taken advantage of
The U.S. trade deficit widened more than forecast in January to a post-recession high, adding to figures cited by President Donald Trump as evidence of American weakness while he brings the nation to the brink of a trade war.
The gap increased 5 percent to $56.6 billion, the biggest since October 2008, from a revised $53.9 billion in the prior month, Commerce Department data showed Wednesday. Exports fell 1.3 percent from December, the most in more than a year, while imports were little changed.
From a current economic standpoint, the widening deficit indicates trade may again be a drag on the pace of first-quarter expansion. The gap has increased in recent months as steady household spending and business investment boost imports. Improving global growth and a weaker dollar have been supporting overseas sales of American-made goods, though not enough to outpace inbound shipments.
From a political standpoint, however, the gap has formed a statistical backdrop first to Trump’s 2016 election campaign and now to his planned tariffs on steel and aluminum. The president has opened multiple fronts in trade battles, from targeting strategic rival China to angering allies like Canada and EU with threats to erect fresh barriers.
The European Union is preparing retaliatory levies on products including motorcycles, jeans and bourbon whiskey if Trump follows through on his threat. A full-blown trade war would risk blunting the effects of the president’s policies such as tax cuts and reduced regulation, aimed at boosting U.S. growth.
“The United States has been taken advantage of by other countries, both friendly and not so friendly, for many, many decades,” Trump said Tuesday when asked if he would push forward with the tariffs despite concerns from fellow Republicans. In an apparent reference to the full-year trade gap in goods, Trump said, “we have a trade deficit of $800 billion a year. And that’s not going to happen with me.”
The median estimate of economists surveyed by Bloomberg called for a January trade deficit of $55 billion in goods and services.
Exports declined to $200.9 billion, led by civilian aircraft, oil and other industrial materials, according to the Commerce Department. At the same time, exports of consumer goods rose to a record $17.9 billion, while shipments of automotive vehicles and parts were the highest since July 2014.
Imports held at $257.5 billion, as petroleum imports rose to a three-year high while capital and consumer goods declined.
What Our Economists Say
Tariffs on solar panels and washing machines, implemented just recently, were advertised well in advance, prompting foreign producers to rush to get goods onshore ahead of time in the fourth quarter. This lifted imports of consumer goods right through the end of last year, which then plunged in January after the tariffs were implemented. Similarly, imports of industrial supplies -- the category that includes metals -- have been on an upward trend in the last several months, likely ahead of stiff steel and aluminum tariffs.
-- Yelena Shulyatyeva and Carl Riccadonna, Bloomberg Economics
Read more for the full reaction note from Bloomberg Economics.
The report also showed the merchandise trade gap with China, the world’s second-biggest economy behind the U.S., widened in January to $36 billion, the highest since September 2015, on an unadjusted basis. The goods trade deficit with Canada hit a three-year high of $3.6 billion.
The trade figures provide a hint of how growth is shaping up in the first quarter, after trade was a substantial drag on the economy in the final three months of 2017. Net exports subtracted 1.13 percentage points from the annualized pace of gross domestic product growth in the fourth quarter, which came in at 2.5 percent.
Trump, who ran on a campaign promise to level the playing field for American companies, said Tuesday that the planned tariffs won’t apply to Canada and Mexico if the U.S. is able to “make a deal” with those countries as they renegotiate the North American Free Trade Agreement.
- After eliminating the influence of prices, which renders the numbers used to calculate GDP, the merchandise trade deficit widened to $69.7 billion -- the highest since August 2006 -- from $68.5 billion in the prior month
- Real petroleum trade gap widened; excluding petroleum, the real merchandise-trade shortfall narrowed to $68.5 billion from $69.5 billion
- Imports, exports of services both rose to records in January
- Exports and imports of goods account for about three-fourths of America’s total trade; the U.S. typically runs a deficit in merchandise trade and a surplus in services
— With assistance by Jordan Yadoo