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US Trade Gap Narrows to Seven-Month Low on Record Exports

June 6, 2018
The latest figures suggest trade is on track to contribute to a projected pickup in U.S. economic growth in the second quarter.

The U.S. trade deficit narrowed to the lowest level since September as exports rose to a record, amid Trump administration tariffs and trade threats that risk hurting global commerce.

The gap decreased 2.1% in April to $46.2 billion, from a revised $47.2 billion in the prior month, Commerce Department data showed Wednesday. The median estimate of economists surveyed by Bloomberg called for an April trade deficit of $49 billion. Exports ticked up while imports fell slightly, according to the report.

President Donald Trump’s tariffs on imported steel and aluminum have showed signs of pushing up prices while disrupting some businesses, though they haven’t yet weighed on broader U.S. economic growth. This month’s extension of the metals levies to allies including Canada and Europe, along with plans for tariffs on additional Chinese goods, risk a wider trade war.

Even so, the latest figures suggest trade is on track to contribute to a projected pickup in U.S. economic growth in the second quarter. Imports are still being supported by steady gains in household spending and business investment. Solid global growth signals demand for U.S.-made goods, though a rebounding dollar may limit overseas sales.

Exports rose 0.3% in April to $211.2 billion, boosted by fuel and petroleum products along with foods, feeds and beverages, though shipments of civilian aircraft -- a volatile category -- dropped $2.8 billion. Imports slipped 0.2% to $257.4 billion on lower purchases of consumer goods and cars.

Even with the April numbers, the trend of a widening trade deficit under Trump remains intact, despite his push to shrink the gap. For the first four months of the year, the deficit was $201.8 billion, compared with $181 billion in the year-earlier period. Annual revisions to data put the 2017 trade deficit at $552.3 billion, compared with a previously reported $568.4 billion, after a 2016 gap of $502 billion.

After eliminating the influence of prices, which renders the numbers used to calculate gross domestic product, the merchandise-trade deficit narrowed in April to $77.5 billion, also the smallest since September, from $78.2 billion.

Oil Production

Petroleum exports, adjusted for inflation, rose to a record high of $19.9 billion, amid rising U.S. oil production. Yet imports also increased, to $32.4 billion, the most since November and resulting in a wider real petroleum deficit of $12.5 billion.

The report also showed the merchandise-trade gap with China, the world’s second-biggest economy, shrank in April to $30.8 billion from $34.2 billion. The deficit with Mexico narrowed to $6 billion and the gap with Europe widened to $13.2 billion. The U.S. showed a $1.7 billion deficit with Canada, after a $34 million surplus in March.

Trump has repeatedly cited the trade deficit as evidence of U.S. weakness, though many analysts see a widening gap as a side effect of a growing economy that’s importing goods. 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.

By Shobhana Chandra

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