West Coast port labor negotiations and the strengthening dollar helped to shrink the U.S. trade gap in January.

The U.S. Department of Commerce reported an 11% decrease in the trade deficit to $41.8 billion from $46.6 billion,  the largest since January 2012. Exports and imports decreased overall, with exports down 2.9% to $189.41 billion and imports down 3.9% to $231.2 billion.

“The special factor of the port strike…will narrow the US trade deficit for this month,” said Michael Gapen, an economist at Barclays Capital.

The disruption in trade activity and December’s unusually high deficit is directly attributed to the labor disputes. Retailers rushed to purchase goods prior to holidays to avoid any potential issues fromt the impending strike.

Container traffic volumes shrank after posting questionably high numbers in December, with inbound traffic down 20% and outbound traffic down 10%.

The decline in service exports can be accounted for by a decrease in transportation, namely through port services.

“Our forecasts were confirmed,” he said. “We felt that import growth would be subdued like export growth.”

Though the port strikes are only a short-term shock to the deficit, the disputes are expected to cut 1% of GDP in Q1 of 2015.

“A stronger dollar will impact the increasing deficit, but it’s not as big of a factor in January versus December,” said Sloane. “The economic differential where the US is headed on global growth makes for weaker trade.”

December’s consumption surge is also attributed to the strengthening dollar, which has made imports cheaper and easier to purchase for the US.

Conversely, stateside-produced goods such as industrial supplies are becoming less attractive and affordable to foreign buyers like China, whose Yuan is expected to depreciate over the coming year due to slow economic growth. Due to depreciating global currencies, exports of industrial supplies declined $2.5 billion for the year.

Albeit supply cuts, the US energy market has continued to thrive despite OPEC’s attempt to cut global competition by keeping a steady output.

“The narrowing of the petroleum deficit mattered most,” said Gaspen. “That was certainly a factor in narrowing the [trade] deficit.”

Key to the narrowed deficit is the US’s diminishing reliance on crude oil imports. October petroleum imports decreased by 11.9% due to a surplus in the market; higher inventory levels have pushed down oil prices.

As activity at the West Coast ports resumes to normal and the dollar continues to appreciate against global currencies, February’s deficit will be slightly higher as imports stay cheap and service exports continue to increase at a steady rate. Energy markets will also enjoy an increase in exports as the US continues lessen its reliance on crude oils and ride the benefits of the shale boom.

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