US trade gap narrows to 7-month low
washington — The US trade deficit fell to a seven-month low in April as exports rose to a record high, lifted by an increase in shipments of industrial materials and soybeans.
The Commerce Department said on Wednesday the trade gap dropped 2.1 per cent to $46.2 billion, the smallest since September. Data for March was revised to show the trade deficit falling to $47.2 billion, instead of the previously reported $49 billion.
The government also revised trade data going back to 2010. Economists polled by Reuters had forecast the trade deficit unchanged at $49 billion in April.
When adjusted for inflation, the trade gap narrowed to $77.5 billion from $78.2 billion in March. The so-called real trade deficit is below its $82.5 billion average in the first quarter.
If the trend in the real trade deficit is maintained, trade could contribute to gross domestic product in the second quarter after having a neutral impact in the JanuaryMarch period.
Strong data ranging from manufacturing to consumer spending and the labor market have led the Federal Reserve Bank of Atlanta to estimate that economic growth in the second quarter will top a 4.0 per cent annualized rate. The economy grew at a 2.2 per cent pace in the first quarter.
But a protectionist trade policy being pursued by President Donald Trump poses a threat to the otherwise rosy economic outlook. Trump in March announced tariffs for steel and aluminum imports to protect domestic industries from what he says is unfair competition from foreign producers.
Last week, Trump extended the duties to steel and aluminium imports from Canada, Mexico and the European Union. Mexico has retaliated with measures targeting a wide range of US farm and industrial products. Canada has said it would slap tariffs on imports from the United States, including whiskey, orange juice, steel, aluminum and other products.
A trade war is also brewing with China. Washington and Beijing have threatened tit-for-tat tariffs on goods worth up to $150 billion each. Trump claims the United States is being taken advantage of by its trading partners, but economists warn that tariffs will hobble the economy, raising prices and destroying jobs for Americans.
US financial markets were little moved by the trade data.
Economists say that tariffs will do little to shrink the trade deficit, partly because of the dollar’s status as the global reserve currency and the low US savings rate, including a fiscal deficit that has been blown up by a $1.5 trillion tax cut package.
The politically sensitive goods trade deficit with China increased 8.1 per cent to $28.0 billion in April. The deficit with Mexico narrowed 29.8 per cent to $5.7
billion in April. The US had a $0.8 billion goods trade deficit with Canada in April.
In April, exports of goods and services rose 0.3 per cent to a record $211.2 billion. Exports have now increased for three straight months. They were in April supported by a $1.3 billion increase in deliveries of industrial supplies and materials such as fuel oil and petroleum products.
Exports of industrial supplies and materials were the highest on record in April. Soybean exports increased $0.3 billion and corn shipments also rose by a similar amount. But exports of commercial aircraft tumbled $2.8 billion.
Exports to China dropped 17.1 per cent in April.
Imports of goods and services slipped 0.2 per cent to $257.4 billion in April. Imports of consumer goods dropped $2.8 billion, weighed by a $2.2 billion decline in imports of cellphones and other household goods. Motor vehicle imports fell $1.0 billion.
washington — China offered to buy nearly $70 billion in American farm, manufacturing and energy products to persuade Washington to drop threatened tariffs, according to a news report on Tuesday.
Top Chinese economic advisor Liu He presented the offer to the American team during the latest round of talks in Beijing last weekend, the Wall Street Journal reported, citing knowledgeable sources.
Under the plan, China would buy a basket of US goods, including soy beans, natural gas, crude oil and coal. But the talks did not appear to yield a breakthrough in the trade impasse between Washington and Beijing.
In 2017, US exports to China were valued at $130.4 billion, meaning China’s offer would amount to a 53.8 per cent increase.
Counting only goods and excluding services, as US President Donald Trump frequently does, the US trade deficit rose to a record $375 billion last year. The White House has demanded a $200 billion reduction.
“If the United States introduces trade sanctions, including tariffs, all the economic and trade achievements negotiated by the two parties will be void,” China’s official news agency Xinhua said Sunday.
According to the Journal report, Liu personally delivered this warning to Commerce Secretary Wilbur Ross. This followed the White House’s announcement last week that Washington would press ahead with plans to impose the tariffs, which are tied to China’s tech sector.
The final list of products subject to the 25 per cent tariffs is due to be published on June 15.
Washington also plans to announce new restrictions on Chinese investment in the United States along with additional export
controls by the end of the month. Those new rules would take effect shortly afterwards.
China has offered to boost purchases of American goods by about $25 billion this year.
President Xi Jinping’s government
has started to quantify its commitment to import more US products as trade talks between the two nations progress, said the people, who spoke on condition of anonymity because the negotiations aren’t public.
Commerce Secretary Wilbur Ross was in Beijing from June 2 to 3 for the third round of high-level trade negotiations. China has warned it would cancel any promises over trade with the US if the Trump administration moves ahead with planned tariffs.
Xi’s government is open to entering into legal contracts to obtain about an additional $25 billion in goods from the US this year. — and Bloomberg