The U.S. exported fewer goods in January than in December, the first decrease in four months, but it hardly justified President Trump’s tariff plan.
The overall trade deficit widened 5 percent from a month earlier, to $56.6 billion, the highest since November 2008, the Commerce Department reported Wednesday. While imports remained unchanged, exports decreased by $2.7 billion, a likely drag on first-quarter GDP. Exports of capital goods such as civilian aircraft took the biggest hit, dropping 5.4 per cent, followed by industrial supplies.
Despite the decrease in exports, economists say they expect a recovery. A weak dollar makes American goods and services more attractive in global markets. In the last year, the U.S. dollar has decreased 15.8 per cent against the euro and 10 per cent against the Chinese yuan. At the same time, major developed economies are growing, creating strong demand overseas. U.S. services continue to run a surplus, led by intellectual property fees.
“Overall, I would expect exports to continue to pick up,” said Ryan Sweet, an economist at Moody’s Analytics in New York City.
Oil imports surged in January because of the cold winter and rising prices, said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, FL. Capital goods imports decreased, but economists expressed confidence that they would bounce back.
“The overall economic and fiscal situation suggests that business investment should pick up, whether it comes from a domestic source or an imported one,” said Thomas P. Simons, vice president of Jefferies LLC in New York City.
Nonetheless, rosy expectations for the future are based on the premise that the global market will remain relatively stable and open, which Trump threatened to disrupt with tariffs.
Trump’s proposal to impose tariffs of 25 per cent on imported steel and 10 percent on aluminum would have very limited impact, if any, on shrinking the deficits. In fact, iron and steel imports decreased 5.8 per cent and aluminum imports by 10.6 per cent in January.
“If the tariffs were to lead to more jobs in the U.S., it will be a small number of jobs that come with a very high cost,” said Simons.
Retaliation against the tariff from allies could be lethal. The European Union is already proposing to tax $3.5 billion of American exports including bourbon, motorcycles and farm products. Canada, the top supplier of both metals to the U.S., also said it was prepared to defend its interests.
“Any significant shift toward protectionist polices would be detrimental to both the U.S. and global economy,” said Sweet.