US trade deficit shrinks on soybean and auto exports

WASHINGTON: The US trade deficit narrowed by the most in 10 months in January as automotive exports rose and China likely boosted purchases of soybeans, driving the first increase in exports in four months and offering a respite to a flood of dour data on the economy.
The politically sensitive goods trade gap with China – a focus of President Donald Trump’s “America First” agenda – narrowed by the most in nearly three years as imports from the world’s No. 2 economy plunged, Commerce Department data released on Wednesday showed. It totalled $34.5 billion in January, the narrowest since June.
The reduced gap with China was the leading force behind a nearly 15 per cent improvement in the overall US trade deficit to $51.1 billion.
That larger-than-expected narrowing in the overall trade deficit was a bright spot after a raft of weak data, including retail sales, manufacturing and home-building, had economists anticipating a sharp slowdown in growth in the first quarter.
“At a minimum, the US trade deficit softens some of the blow from all of the other negative figures,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
Even with the improvement, the trade deficit remains large despite Trump’s policies to significantly shrink it. The White House’s protectionist trade tariffs have left the United States mired in a bruising trade war with China and provoked retaliatory tariffs from other trading partners.
The Commerce Department said the trade deficit declined 14.6 per cent, the largest drop since March 2018, to $51.1 billion also as increased domestic oil production and lower crude prices curbed the import bill. Economists polled by Reuters had forecast the trade gap narrowing to $57.0 billion in January.
Washington last year imposed tariffs on $250 billion worth of goods imported from China, with Beijing striking back with duties on $110 billion worth of American products, including soybeans and other commodities.
Trump has delayed tariffs on $200 billion worth of Chinese imports as negotiations to resolve the eight-month trade war continue, with Beijing pledging to resume bulk purchases of soybeans after cancelling orders at the peak of the trade fight.
US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are expected in China this week for another round of talks with Chinese Vice Premier Liu He.
The trade deficit with China fell 6.4 per cent in January. US imports from China had surged in prior months as American businesses front-loaded shipments of goods like household furniture and appliances in anticipation of more duties. — Reuters