When the Commerce Department releases its latest report for U.S. international trade on Wednesday, economists say they expect to see a slight widening of the trade deficit.
The report, which covers the month of February, will detail the difference between how much the U.S. imports from its global trading partners and how much it exports to them.
Here’s five things to keep an eye on:
In recent months, the U.S. trade deficit for goods and services has ballooned in December to $59.9 billion and then plunged in January to $51.1 billion.
Now, economists say they expect February’s report to show it widening a bit, partly because of a slowing global economy that demands less U.S. exports and a strong U.S. dollar that increasingly buys more imports. The median estimate of economists surveyed by Bloomberg was $53.4 billion. David Sloan, economist at Continuum Economics, estimated a deficit of $53.2 billion and said this indicated “volatility.”
Trade with China and soybeans
A trade deal between the U.S. and China is reportedly on the horizon, potentially ending the use of tariffs by both countries, which have hurt various sectors in each of the countries.
Amid trade talks in January, the U.S. decreased its deficit with China 15% to $33.2 billion, a sign of China softening its protectionist stance. That was a political win for President Donald Trump, who’s been pining to reduce the deficit. In the same month, the U.S. increased its sales of soybeans to China, a win for U.S. farmers who’ve been hurt by tariffs since they began in 2018.
Sloan said he expects the exports of U.S. soybeans to slightly increase, while Ryan Sweet, an economist at Moody’s Analytics Inc., expects them to continue at the same rate in February.
Impact of Chinese Lunar New Year
The Chinese Lunar New Year may also have an effect on the U.S. trade deficit.
The annual Chinese celebration, which occurred this year on Feb. 5, closes down factories and brings production to a halt. Since China is the biggest trading partner of the U.S., the holiday will likely factor into the widening of the U.S. trade deficit when February’s trade report is released.
The price of oil is going up, said Michael Englund, the principal director and chief economist for Action Economics, LLC. He said that will likely decrease imports of oil, which had already decreased by $1.4 billion in January. That will likely decrease exports of U.S. oil, which seen increases because of an uptick in production due to a reduction of regulations in recent years.
A trade deficit isn’t necessarily bad
Finally, it should be noted that a country’s trade deficit isn’t necessarily a bad thing for its economy. For years, President Trump has pledged to reduce the U.S. trade deficit, saying that the U.S. was being ripped off and he would fight back on behalf of Americans. On several occasions, he’s expressed his disgust with having deficits with several specific countries.
“We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. Very bad for U.S. This will change,” Trump tweeted in early 2017.
But his administration’s policies have actually widened the trade deficit by juicing the U.S. economy, said Sweet, the economist at Moody’s Analytics Inc. The U.S. economy is strong and people can afford imports, Sweet said, which isn’t what Trump had been expecting to happen with a trade deficit