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Economic Forecasts

U.S. Exports Rise on Quickening Global Growth, but Imports Rise More

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

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Improving global demand and a weaker dollar are boosting sales of U.S.-made goods overseas. That’s contributing to a pickup in U.S. factory activity and creating jobs as companies invest to increase their output. Since the beginning of the year, the greenback has eased about 5% in value against other major trading currencies, so U.S.-made products are cheaper in foreign markets. Simultaneously, overseas economies including Europe are adding momentum, becoming stronger markets for American exports.

However, imports are heading up, too and at a slightly faster pace. The U.S. and the global economies are enjoying their strongest growth since the 2007-09 recession. National unemployment is down to 4.1%, Americans’ incomes are climbing, and robust consumer spending is extending to imports. As a result, we are revising up our estimate of the expected widening in this year’s trade gap to 6% (from 4%). That will follow deficits of $504 billion in 2016 and $500 billion in 2015.

Global trade volume is up and on a rising trajectory for 2018. Other major economies, such as China and Japan, are expanding, and key Latin American nations — notably Brazil — have shaken off recession and are growing again. Through the first three quarters this year, U.S. exports posted a 5.6% increase from the comparable period in 2016. However, imports are ahead by 6.3% on the strength of more foreign-made autos, telecommunications gear and computers landing on American shores. President Trump has pledged to narrow the trade deficit. To that end, his advisers are critically scrutinizing free trade agreements. However, the U.S.’s position as the world’s largest economy means its consumers welcome imports, while other countries aiming to boost their exports happily oblige them.

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During September, the monthly shortfall between exports and imports grew 1.7% to $43.5 billion. Imports increased by 1.2% across nearly every major category of goods. Capital goods and industrial supplies were notably strong, reflecting healthy levels of U.S. industrial activity and domestic demand. Exports of petroleum products were up from August, reflecting the reopening of Gulf Coast ports after multiple hurricane strikes.

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Sources: Department of Commerce, Trade Data