The U.S. trade gap narrowed in November to the smallest in three years as exports advanced amid a thaw in the trade war with China, while imports fell to the lowest since 2017.
The overall U.S. deficit in goods and services shrank to $43.1 billion in November from $46.9 billion the prior month, according to data released Tuesday by the Commerce Department. The median estimate of economists surveyed by Bloomberg called for a shortfall of $43.6 billion.
The figures suggest the gap may shrink on an annual basis for the first time since 2013, largely reflecting a steep drop in imports from China following President Donald Trump’s tariffs on goods from the country, along with America’s shift to becoming a net exporter of petroleum. While a narrower deficit would let Trump claim his trade policies are bearing fruit, the battle has cast a pall over U.S. manufacturing and caused business investment to slide as companies wrestle with uncertainty.
The report also indicates trade is on track to contribute to fourth-quarter economic growth after having weighed on gross domestic product for the previous two periods.
The U.S. and China announced a phase-one accord in mid-December following agreement in October on the broad contours, at least temporarily calming fears of an escalating trade war. The deal will involve reduced tariffs in exchange for more Chinese purchases of American farm goods such as soybeans and pork as well as commitments on intellectual property, forced technology transfer and currency markets.
The merchandise trade deficit with China shrank to a seasonally adjusted $25.6 billion, the smallest since 2013, according to data compiled by Bloomberg. Exports to the Asian nation rose by $1.4 billion, the most since February, while imports declined for a sixth straight month, reflecting the toll of more than a year of tariffs.
For the first 11 months of 2019, the overall gap in goods and services was $563 billion, compared with $566.9 billion in 2018; for merchandise, the deficit narrowed to $791.2 billion from $806.4 billion.
What Bloomberg’s Researchers Say
“Export growth should be muted, but positive, as the phase-one trade deal removes some uncertainty. However, it remains unclear whether economic uncertainty and slow global growth will reverse enough to prompt a strong revival in business investment and exports.”
—Eliza Winger, Bloomberg Economics
President Donald Trump has said he’ll sign the trade deal in Washington Jan. 15. A Chinese delegation, led by its top trade negotiator, Vice Premier Liu He, will travel to the U.S. capital to sign it, according to people familiar with the matter, Bloomberg reported this week.
The U.S. typically runs a services surplus and merchandise deficit, a shortfall that Trump has assailed as unfair.
Even as a shrinking deficit provides a possible talking point for Trump, overall U.S. trade with China has fallen sharply in 2019, dropping the Asian nation to third place among trading partners, behind Mexico and Canada.
In the first 11 months of last year, merchandise imports from China were down 15% and exports to the country dropped 11.4%. The U.S. goods deficit with China narrowed to a seasonally adjusted $319.8 billion from the same 11 months of 2018, the report showed.
Overall exports of goods and services in November rose 0.7% to $208.6 billion, including gains in consumer goods, capital goods and soybeans. Imports fell 1% to $251.7 billion, with declines in civilian aircraft, consumer goods and petroleum products.
In nominal terms, the petroleum surplus edged up to a record $832 million, further boosting America’s new status as a net exporter. Price-adjusted imports of petroleum were $27.2 billion, the lowest in data back to 1994.
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