USA trade deficit drops 15%

Kristopher Nichols
May 5, 2018

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.

Record exports trimmed the USA trade deficit in March, the first drop in seven months in a massive gap that President Donald Trump is determined to shrink with an aggressive America first policy.

This means that Canada posted the largest trade deficit in our nation's history in March, with the gap between imports and exports reaching $4.14 billion.

The Canadian dollar slipped to C$1.2870 to the US dollar, or 77.70 USA cents, from C$1.2840, or 77.88 USA cents before the data were released.

Imports dropped 1.8% in March, "starting to reverse the surge which followed the hurricanes last summer, when wholesalers and retailers had to rebuild inventory very quickly", Pantheon Macroeconomics chief economist Ian Shepherdson said in a note to clients.

Data on global trade can be volatile from month to month, and the figures weren't adjusted for inflation.

The administration is also seeking to renegotiate the North American Free Trade Agreement with Mexico and Canada, and has slapped tariffs on imported steel and aluminum.

The president views trade deficits as a sign of economic weakness that can be brought down by more aggressive trade policies. Gross domestic product grew a respectable 2.3% in the first quarter of 2018.

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Several analysts also pointed to the timing of Lunar New Year, which began in mid-February, as a possible source of recent import volatility.

The government reported last week that trade contributed 0.2 percentage point to the first quarter's 2.3 per cent annualised growth pace.

The United States ran a $20.5 billion surplus in the trade of services such as education and banking.

Meanwhile, U.S. exports climbed 2% from February to their highest dollar value on record including larger shipments overseas of civilian aircraft, soybeans, corn and crude oil.

Imports of goods and services fell 1.8 percent to $257.5 billion, in part as the boost from royalties and broadcast license fees related to the Winter Olympics faded.

Exports to the United States rose 1.2 percent while imports increased by 3.1 percent.

Demand for USA exports has helped support the manufacturing sector, aided by a weaker dollar and stronger growth overseas. Bilateral trade was led by higher imports of passenger vehicles and higher exports of crude oil.

March's drop in core capital goods orders and shipments suggest business spending on equipment is slowing.

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