Trade Deficit Forecast

Economic Forecasts

Trade Deficit Narrows as Imports Continue to Decline

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

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The U.S. trade deficit narrowed in January as trade flows with the rest of the world slowed. The trade deficit in goods and services narrowed in January to a seasonally adjusted $45.3 billion, a 6.7% decline from the prior month. The deficit with China decreased $2.1 billion to $23.7 billion in January.

Both exports and imports fell in January. Imports fell by $4.2 billion — the fourth decline in five months. Exports were mostly flat, rising by just $0.9 billion. The decline in imports reflected fewer purchases of industrial supplies, capital equipment and autos. U.S. companies shipped fewer aircraft and less oil.

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Trade will likely provide a small boost to first-quarter GDP growth. Exports, which raise GDP growth, will likely grow more slowly or stay flat in the first quarter. The faster decline of imports relative to exports, however, means that trade will have a positive impact on GDP growth calculations in the first quarter.

The impact of COVID-19 on trade will be more visible in February and March. Recent press reports indicate that container shipments from China into U.S. ports are experiencing significant volume declines. Imports and exports will likely be rattled in coming months. Reduced Chinese output because of the virus will weigh on U.S. imports in particular. Travel restrictions will reduce foreign travel to the United States, which is counted as a service export.

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Sources: Department of Commerce, Trade Data