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The trade deficit fell slightly in February, narrowing to a seasonally adjusted $122.7 billion from a downwardly revised $130.7 billion in January — a 6.1% monthly decline. The trade deficit is a measure of the difference between what the United States buys from foreign nations and what it sells overseas, and includes both goods and services. The data show American companies getting ahead of new U.S. tariffs by fast-tracking orders before the levies took effect. Year-to-date, exports have increased 4.6%, while imports have increased 21.4% from the same period a year ago. With the tariff announcements in April, including a 10% reciprocal tariff on virtually all U.S. imports, the trend is unlikely to reverse any time soon. While softening economic activity in advanced economies will weigh on demand for U.S. goods abroad, the recent weakness of the dollar may support overseas demand for American products.
The strength in exports in February was broad-based. Total exports rose 2.9% from the previous month. Gains in exports were led by stronger sales of industrial supplies, but outbound shipments of capital goods plus autos and parts also picked up. Outbound shipments of nonmonetary gold accounted for nearly half of the total increase in goods exports. The prospect of a trade war seems to have prompted firms abroad to rush orders to avoid retaliatory tariffs levied on American goods by their own governments.
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Imports were high again in February, in line with January’s level, the result of a record increase. Imports of goods decreased slightly, by $500 million, which entirely offset a $500 million gain in imports of services. Most of the decline in goods imports was tied to a fall in purchases of finished metal shapes and nonmonetary gold. Imports of consumer goods and capital goods continued to grow in February, led by purchases of cell phones, pharmaceuticals, computers, civilian aircraft and medical equipment. Imports have outpaced exports on average over the past nine months.
The surge in imports so far this year is likely to dent GDP growth in the first quarter. Excluding the data distortion from gold, imports are on track for an 18% annualized increase, in real terms, in the first quarter. Exports are on track for a much smaller 4.6% annualized gain.
Source: Department of Commerce, Trade Data
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