FLASH: President Trump’s Trade Policy Working
The US trade deficit fell for the 1st time in 6 months in November amid declines in imports leading economists to boost their economic growth estimates for the for Q-4 Y 2018.
The consumer goods-led drop in imports reported by the Commerce Department on Wednesday would normally raise concerns about slowing domestic demand.
But the sharp drop followed 5 straight monthly increases on inventory buildups of imported goods as the trade dispute between the United States and China escalated.
The trade deficit dropped 11.5% to $49.3-B in November. Economists polled by Reuters had forecast the trade deficit would fall to $54.0-B in November.
The politically sensitive goods trade deficit with China fell to $37.9-B in November from $43.1-B in October.
The Trump Administration’s “America First” policies have led Washington to impose tariffs on a range of imported goods from China.
President Trump has long railed against China’s trade surplus with the United States, and accuses Beijing of not playing fairly on trade. The United States has also imposed duties on imported steel, aluminum, solar panels and washing machines.
The drop in the real trade deficit led some economists to raise their Q-4 GDP growth forecasts by as much as four-tenths of a percentage point to as high as a 2.6% annualized rate.
Trade subtracted 1.99 percentage points from GDP growth in the July-September quarter. The economy grew at a 3.4% pace in Q-3.
A domestic energy boom has enabled the United States to reduce its dependence on foreign Crude Oil, leading to a reduction in the volume of petroleum imports.
Exports of capital goods increased $1.4-B, lifted by a $1.0-B rise in civilian aircraft shipments.
Now, given the USD’s strength and signs of resolution in the US-China trade talks, economists expected the drop in imports to be temporary. The weakness in exports was, however, expected to persist against the backdrop of slowing global economic growth.
Last week, President Trump said he would meet with Chinese President Xi Jinping soon to try to seal a trade deal.