Record exports help narrow US trade deficit in April

The US trade deficit narrowed in April as exports jumped to a record high, a trend that if sustained, puts trade on course to contribute to economic growth this quarter.

The smaller trade gap, which was reported by the Commerce Department on Tuesday, partly reflected higher energy prices because of the US-backed war with Iran, which has disrupted shipping in the Strait of Hormuz. Petroleum exports hit a record high in April.

“The good news is that the trade picture is moving into better balance at the start of the second quarter as tariffs keep the growth of imports down relative to surprising strength seen in exports, but the bad news is the export growth looks uncertain, as much of it appears to be the result of higher energy prices from the Iran conflict,” said Christopher Rupkey, chief economist at FWDBONDS.

The trade gap contracted 1.2 percent to US$55.9 billion (HK$438 billion), the Commerce Department’s Bureau of Economic Analysis and Census Bureau said. Data for March were revised lower to show the deficit at US$56.6 billion instead of the previously reported US$60.3 billion.

Economists polled by Reuters forecast the trade deficit would shrink to US$56.1 billion in April.

Exports increased 2.6 percent to US$327.1 billion, an all-time high. Goods exports surged 4.1 percent to a record US$221.3 billion. Exports of capital goods increased US$4.0 billion, boosted by computers and civilian aircraft.

Exports of industrial supplies and materials, which include petroleum, also set an all-time high. Petroleum exports were the highest on record, boosted by higher volumes and oil prices amid the Middle East conflict. The US is a net oil exporter. Consumer goods exports increased US$1.7 billion.

Imports rose 2.0 percent to US$383.0 billion in April. Goods imports advanced 2.1 percent to US$304.9 billion. They were lifted by a US$7.0 billion increase in capital goods, mostly computers, semiconductors and telecommunications equipment, as businesses ramped up investment in artificial intelligence.

But imports of industrial supplies and materials fell US$0.9 billion. The goods trade deficit contracted 2.8 percent to US$83.7 billion. When adjusted for inflation, the goods trade gap narrowed US$1.5 billion, or 1.8 percent, to US$84.3 billion. Trade has been a drag on gross domestic product for two straight quarters.

“The latest trade data bode well for GDP when excluding trade in gold,” said Stephen Brown, chief North America economist at Capital Economics.

The Atlanta Federal Reserve’s GDP tracking estimate for the second quarter is running at a 3.0 percent annualized rate. The economy grew at a 1.6 percent pace in the first quarter.

PROTECTIONIST TRADE POLICY

The goods trade deficit with China decreased US$2.6 billion to US$12.0 billion, with both exports and imports declining. The US had deficits on the goods trade balance with Taiwan, Vietnam, Mexico, the European Union, Canada and South Korea among other nations.

The Trump administration has defended its protectionist trade policy as necessary to address these imbalances. The trade surplus with the United Kingdom dropped US$3.8 billion to US$2.6 billion in April, reflecting declines in both exports and imports.

Exports of services fell US$0.4 billion to US$105.8 billion in April, pulled down by weakness in travel, transport and maintenance and repair services. But exports of other business services increased. Imports of services shot up US$1.3 billion to US$78.0 billion, boosted by transport, travel and insurance services.

Reuters

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