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. Wednesday's report from the Commerce Department was the latest sign of robust economic growth in the second quarter.
But a protectionist trade policy being pursued by President Donald Trump, which has seen the United States slapping tariffs on imports from a host of countries including China, Mexico and Canada, as well as those in the European Union, poses a threat to the otherwise rosy economic outlook.
"One is hard-pressed as to not concur that the US economy not only remains on solid footing, but is likely to show an accelerated pace of growth in the second quarter," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. Still, "trade tensions remain a threat to the outlook and clearly have the potential to derail economic growth," he said.
The Commerce Department said the trade gap narrowed 2.1 percent 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 $49.0 billion. 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 January-March period. Economists say 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 saving 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 percent to $28.0 billion in April. The United States had a $0.8 billion goods trade deficit with Canada and a $5.7 billion shortfall with Mexico. Exports of goods and services rose 0.3 percent to a record $211.2 billion in April. It was the third monthly increase in exports.
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.
Imports of goods and services slipped 0.2 percent 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. Economists said the drop in imports was likely temporary given strong domestic demand. Crude oil imports rose $1.0 billion in April, with prices averaging $54.50 per barrel.