Trade deficit drops 19.2 percent, settles at $40.9B in April
WASHINGTON — The U.S. trade deficit declined sharply in April as exports posted a modest gain and imports fell, raising hopes that trade’s drag on economic growth will ease in the current quarter.
The April deficit tumbled 19.2 percent to $40.9 billion after surging to $50.6 billion in March, the Commerce Department said Wednesday. The March deficit had been the highest level since late 2008.
The big surge in the deficit reduced overall economic growth by nearly 2 percentage points in the first quarter, sending gross domestic product into negative territory.
In April, exports edged up 1 percent to $189.9 billion, led by a big rise in commercial airplane sales. Imports fell 3.3 percent to $230.8 billion. The deficit is the difference between imports and exports.
The big deficit increase in March reflected the end of a labor dispute that had tied up West Coast ports. With the ports fully operational, a backlog of imports — many from China — flooded into the country. Economists had predicted with the backlog processed, the deficit would shrink in April to more normal levels.
For the first four months of the year, the deficit is running 1 percent higher than the same period a year ago. Economists believe this year’s deficit will increase modestly from the revised $508.3 billion deficit in 2014.
Robert Kavcic, senior economist at BMO Capital Markets, said he believed trade’s impact would be roughly neutral in the April-June period and likely would trim growth by about a half percentage point for the entire year.
American manufacturers have been hurt by a rise in the value of the dollar over the past year. The stronger dollar makes American goods more expensive on overseas markets and makes imports cheaper for U.S. consumers.
But a boom in U.S. energy production has helped lower the trade deficit, reducing Americans’ reliance on foreign oil. In April, the petroleum deficit shrank to $6.8 billion, the lowest level in 13 years.
The rise in exports reflected not only the increase in oil shipments but also gains in sales of American-made airplanes, telecommunications equipment, autos and heavy machinery. The fall in imports reflected declines in imports of autos, industrial machinery and consumer goods, including cellphones and clothing.
The deficit with China, which had surged in March, dropped 15.2 percent to $26.5 billion in April. But for the year, the deficit with China is running 12.7 percent above the same level in 2014, the latest year in which the U.S.-China trade gap set another record.
On top of the trade deficit, the economy ran in to other headwinds in the first quarter, including a severe winter that slowed economic activity. There was also a sharp cutback in capital expenditures by U.S. energy companies as the price of oil plunged.
But economists are looking for growth to recover in the current quarter, expecting the overall economy, as measured by the gross domestic product, to expand at a rate of around 2.5 percent, helped by healthy job gains. New jobs should lead to increased spending by Americans while some of the adverse effects that held back growth at the beginning of the year fade in the April-June period.
President Barack Obama is lobbying Congress for the power to negotiate major trade agreements under expedited procedures that would require an up or down vote without amendments by lawmakers. The 12-nation Trans-Pacific trade deal would include Chile, Vietnam and Japan.
Obama and backers of the trade deal argue that it would open huge markets to U.S. goods by lowering tariffs and other trade barriers. But critics, including labor and environmental groups, say the trade agreement would subject American workers to unfair competition from countries with lower standards for labor rights and environmental protections.
The Senate has approved the fast-track proposal, but it faces Democratic opposition in the House.