The U.S. trade deficit has been widening for 5 consecutive months. January’s deficit reached the highest since November 2008, and February is expected to continue widening. Here are the five things you want to watch in the International Trade Report to be released on April 5 from the Commerce Department:
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- Services Surplus will Narrow
The winter Olympics has a temporary but perceptible effect on service trade. The U.S. media companies had to import broadcasting licenses from South Korea to air the game. It will narrow the steady service surplus that the U.S. has been running for decades.
“This is a one-time event, but it’s likely to cause the deficit to widen,” said Ryan Sweet, an economist at Moody’s Analytics in New York City. “Overall trade is likely to be a drag on first quarter GDP growth.”
- Goods Exports Rebound
Exports are expected to rebound after a downturn in January. Major developed economies are growing, creating strong demand overseas. At the same time, a weak dollar favors American exports. One dollar equals 0.81 euro today, 13.8 percent lower than the same time last year, and 6.28 Chinese yuan, 8.9 percent lower than last year.
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- Goods Imports might Rise
The tariffs on imported steel and aluminum won’t significantly affect the trade data of February since it went into effect on Mar 23. But there is a possibility that it will cause imports to rise a little bit, because businesses might try to brace themselves for rising cost by importing more goods to stock up inventory before the tariffs take hold, said Sweet.
- Imported Steel
Countries that are temporarily exempt from the tariff account for more than half
of imported steel, including Canada, Brazil, South Korea, Mexico, the European Union, Australia and Argentina. As a result, the tariff is effectively aiming at China, which accounts for only 2% of imported steel.
“So far these trade actions seem to be intended to generate press releases but seems to have very little significant effect on real trade flows,” said Robert Stock, a Senior Economist at the Economic Policy Institute.
- Deficit with China
Last Thursday President Trump imposed tariffs on about $60 billion Chinese imports, mostly high-end products including aeronautics, modern rail, new-energy vehicles and high-tech products.
The annual goods deficit with China was $375.2 billion in 2017, highest on record, and imports were more than $500 billion. However, the top import categories are not high-tech products at all. They are mostly consumer goods, including electrical machinery, furniture and bedding, toys and sports equipment, and footwear, according to the Census Bureau. Therefore, the tariffs are unlikely reduce imports, and exports will probably decline because of retaliation from the Chinese after the tariffs go into effect in May.