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US trade deficit drops in January as imports from China fall
WASHINGTON, March 28, 2019 (BSS/AFP) – The US trade deficit dropped nearly
15 percent in January compared to December, largely due to declining imports
from China, the Commerce Department reported Wednesday.
Economists say the decline could help support growth in the first three
months of the year, which would be a welcome development amid signs the
world’s largest economy has peaked.
The drop reversed most of the expansion in the trade gap posted in the
final month of 2018, a year that saw the deficit surge to a 10-year record,
despite President Donald Trump’s aggressive tariff policies.
The trade gap in December surged nearly 19 percent to $59.9 billion but
fell back to $51.1 billion in January, the report said.
Analysts had been expecting a much more modest narrowing of the January
deficit, which also was 3.7 percent smaller than it was a year earlier.
US imports fell 2.6 percent to $258.5 billion while exports rose just
under 1 percent to $207.3 billion, according to the data.
And the deficit in goods alone with China — the primary foe in Trump’s
trade wars — fell by $5.5 billion in the month to $33.2 billion, according
to the report, almost entirely due to declining American purchases of Chinese
goods.
The falling average price for oil, which hit the lowest point in three
years, also helped narrow the trade gap by $1.4 billion.
In addition to the impact of tariffs on trade with China, the stronger-
than-expected decline in the trade deficit could reflect the slowing in the
US and global economies.
However, some economists say the smaller trade gap should add to first
quarter growth.
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– Subdued exports –
“The data look consistent with net exports adding at least a few tenths to
the growth rate in Q1,” said Jim O’Sullivan of High Frequency Economics.
Ian Shepherdson of Pantheon Macroeconomics said it is too early to tell
the exact impact, but “we’re penciling-in a 0.3 percentage point contribution
to GDP growth.”
“The record December deficit always looked like an outlier, and data on
container movements at major ports pointed clearly to a reversal in January,”
said Shepherdson, who unlike his counterparts correctly forecast the trade
gap.
However, others caution that a cooling global economy means export
momentum likely will be subdued, which could lead to a continued rise in the
deficit, especially as a strong US dollar makes imports cheaper, despite the
impact of tariffs.
US goods exports to China fell to just $7.1 billion, not adjusted for
seasonal factors, the lowest since September 2010.
The goods balance with Canada shifted to a surplus of $1.4 billion, while
the deficit with Mexico narrowed more than $1.5 billion to $7.2 billion, and
with the European Union fell more than $2.5 billion to $13.1 billion.
But in services, where the US is a dominant force, exports were the
highest on record at $70 billion, according to the report.
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