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Economic Forecasts

More Headwinds for Exporters

Kiplinger's latest forecast on the direction of the trade deficit

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GDP 1.5% growth for the year; a 2.1% pace in '17 More »
Jobs Hiring at 150K-200K/month through '16 More »
Interest rates 10-year T-notes at 2.7% by end '17 More »
Inflation 2.0% for '16, 2.4% in '17 More »
Business spending Slight gain in '17 after flat '16 More »
Energy Crude oil trading from $50 to $55 per barrel in March More »
Housing Single-family starts up 9% in '16, 11% in '17 More »
Retail sales Growing 3.7% in '17 (excluding gas) More »
Trade deficit Widening 4% in '17, matching increase in '16 More »

The U.S. trade deficit will widen another 4% next year on top of a 4% increase in 2016 as U.S. exporters continue to face stiff headwinds from weak markets abroad and a strong dollar that makes their goods pricier than those of many foreign competitors.

Growth among the United States’ major trade partners remains lackluster: China is slowing while the European Union and Britain are grappling with how to initiate a British exit from the free-trade union, a process that is bound to increase uncertainty about Europe’s economic vitality. At the same time, popular sentiment against freer trade, and globalization generally, has turned negative in many quarters, making efforts to boost cross-border business more difficult politically.

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When the dust settles on this year, the trade deficit will clock in at $520 billion.

While exporters are struggling, U.S. consumers’ appetites for foreign products are growing larger. Thanks to job and wage gains, consumers feel less pinched and are more willing to spend.

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Among major trade partners, China’s economy is slowing while the European Union comes to grips with how to manage a British exit from the continent’s free trade union plus cope with turmoil in other parts of the EU.

The shortfall between exports and imports grew by a whopping 17.8% during October, to $42.6 billion. Exports of soybeans and corn as well as consumer goods weakened from September, while imports of foreign-produced pharmaceuticals, cell phones and capital goods surged.

The dollar’s value, which had been steadying prior to the presidential election, has regained its mojo since Donald Trump emerged as the president-elect.

The greenback is up about 4% on a trade-weighted basis since Nov. 8, rising against the currencies of key trading partners, including the euro. Upward pressure on the value of the dollar is a good bet to intensify if the Trump administration follows through on threats to slap severe tariffs on major trade partners who are seen as engaging in unfair trade practices.

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Sources Department of Commerce, Trade Data