U.S. Trade Deficit Falls to Seven-month Low

Posted on: 08 Jun, 2018

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


Image Source: The Economist

The U.S. 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 percent to $46.2 billion, the smallest since September. Data for March was revised to show the trade deficit falling to $47.2 billion, instead of the previously reported $49.0 billion. 

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

When adjusted for inflation, the trade gap narrowed to $77.5 billion from $78.2 billion in March. The so-called real trade deficit is below its $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 labor market have led the Federal Reserve Bank of Atlanta to estimate that economic growth in the second quarter will top a 4.0 percent annualized rate. The economy grew at a 2.2 percent 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 aluminum imports to protect domestic industries from what he says is unfair competition from foreign producers. 

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

Source: The Economic Times

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