The Economy

U.S. Trade Deficit Falls 15% to $49 Billion

Despite the March decline, the U.S. is still “on track to run another large trade gap in 2018 that exceeds the deficit in the prior year."
Matthew HellerMay 4, 2018

The U.S. trade deficit fell 15% to a six-month low in March on a surge in exports, ending a streak of increases that had weighed on economic growth.

The Commerce Department said the deficit declined to $49 billion in March from $57.7 billion in February, the highest level since October 2008. Economists polled by MarketWatch had forecast a $49.4 billion gap.

Exports set a new record by advancing 2% to $208.5 billion while imports dropped 1.8% to $257.5 billion.

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The surge in exports was powered by increased deliveries of commercial aircraft, petroleum, and even soybeans and corn ahead of pending tariffs by China in retaliation for U.S. trade sanctions. The U.S. imported far few consumer goods such as TVs, computers, toys, and appliances.

The politically sensitive goods trade gap with China dropped 11.6% to $25.9 billion, with exports to China jumping 26.3% and imports from China down 2.1% in March. But according to Reuters, that “will probably do little to ease tensions between the United States and China.”

MarketWatch also reported that despite the March decline, the U.S. is still “on track to run another large trade gap in 2018 that exceeds the deficit in the prior year.

“The good news is that we are exporting more, but with the labor markets incredibly tight, labor costs are accelerating as well,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa.

The drop in the trade gap in March prevented a sharper slowdown in economic growth. Gross domestic product grew a respectable 2.3% in the first quarter of 2018. “The U.S. has run large deficits for years, however, and that’s not going to change anytime soon despite a concerted push by President Trump to reduce the gap,” MarketWatch said.

“Talk of a potentially damaging trade war has even contributed to recent declines in U.S. stocks and it may be hurting the economy,” it added. “Some companies complain they have to pay higher prices for steel and many executives are worried about what happens next.”

Imports of goods and services fell 1.8% in March to $257.5 billion.