Trade Deficit Forecast

Economic Forecasts

Trade Deficit Narrowed Last Year for First Time Since 2013

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

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The monthly U.S. trade deficit widened in December for the first time in four months, increasing to a seasonally adjusted $48.9 billion. That was the biggest increase since August. For 2019 as a whole, exports declined 0.1% — the first yearly drop since 2016. Imports fell even more, slipping 0.4%. The trade deficit narrowed last year, partly because of an improvement in the trade deficit with China, which lost its spot as the top U.S. trade partner.

Monthly exports rose in December, but not enough to offset the increase in imports. They rose 0.8%, buoyed by industrial supplies and materials. Imports jumped 2.7% from November, after declining the three previous months. Imports rose in every major category except automotive. Imports of consumer goods rose 1.3% in December and should continue to rebound in coming months. An important reason for the increase was a substantial pickup in imports of energy-related petroleum. Services exports and imports both saw gains. Exports rose 0.4% and imports increased 0.8%.

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Trade will likely contribute little to first-quarter GDP growth. Exports, which increase GDP growth, will likely grow more slowly than imports in early 2020. For the fourth quarter as a whole, imports declined while exports rose, which resulted in a large boost to GDP growth. The coronavirus outbreak could potentially hit both exports and imports in the first quarter. It is too early, however, to gauge the magnitude of the impact.

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Sources: Department of Commerce, Trade Data