- The gap between the goods the US exports and imports fell to a five-month low in November.
- Lower oil prices and tariffs likely contributed to the decline.
- The politically-sensitive gap with China also narrowed.
The monthly US trade deficit narrowed in November after increasing for five straight months, including with China.
The overall gap between the number of goods the US imports and exports fell more than 11% to $US49.3 billion from a $US55.5 billion a month earlier, the Commerce Department said Tuesday. That was its lowest level since June and well below expectations for a $US54 billion deficit.
Some of the unexpected plunge could be explained by lower oil prices, which shed more than a third of their value at the end of 2017. Non-oil exports dipped 0.4%, while non-oil imports fell 2.9%. President Donald Trump’s trade wars could have also been responsible for the decline, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The US-China trade deficit also shrank $US2.8 billion to $US35.4 billion in November, likely affected by the tariffs on hundreds of billions of dollars worth products Washington and Beijing levied last year.
“To be clear, the underlying trends in both the bilateral deficit with China and the U.S.’s overall trade deficit are rising, because domestic supply can’t keep pace with domestic demand growth, and net trade is still likely to be a drag on Q4 GDP growth,” Shepherdson said.
The goods trade deficit with Beijing had hit an all-time high of $US43.1 billion in October, with Chinese shipments to the US up by nearly a tenth from a year earlier. That balance has likely been impacted by waves of frontloading, or companies rushing orders to avoid duties.
Andrew Hunter, senior US economist at Capital Economics, said November’s reversal is unlikely to last for long, however.
“Along with the appreciation of the dollar last year, the slowdown in global demand will continue to weigh on exports for the foreseeable future, with the latest surveys of new export orders suggesting that real export growth fell close to zero in early 2019,” he said.
Trade balances are determined by an assortment of factors, including foreign exchange rates, the strength of an economy, and how much a country borrows from abroad.
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