The U.S. trade deficit in March narrowed for the first time since September, and experts say it might keep narrowing in the future.

The goods and services deficit in March was $49.0 billion, down 15.2 percent from February , according to a report released by the Department of Commerce Thursday. Exports increased $4.2 billion, or 2 percent, and imports dropped $4.6 billion, or 1.8 percent, from last month. The biggest increases in exports were in civilian aircraft, agriculture products and petroleum. Imports fell in all categories but automobiles.

“In this particular month, export happened to tick upwards and import fell, so we got two big moves that produced a very large drop in the trade gap,” said Michael Englund, chief economist from Action Economics LLC.

While President Trump always yearns for a narrowing deficit as he thinks trade imbalance hurts the economy, most economists don’t think that’s the right way of looking at things. In fact, they agree that it’s too early to see any impact of the various proposed tariffs, because most of them hasn’t come into effect in March.

The rise in exports is being driven in part by the strength of major developed economies creating strong demand overseas. Goods exports increased $1.6 billion with China and $1.1 billion with the European Union. Meanwhile, a weak dollar makes American goods and services look cheaper in global markets. Economists said the decline in imports was probably driven in part by the fact that most hurricanes rebuilding activities are approaching the end, so the need for building materials dropped.

U.S. services continue to run a surplus. Imports of services in March fell back to the normal after the February Winter Olympics in PyeongChang, South Korea where American media companies need to pay licensing fees to broadcast the game. Exports still held up well led by travel and intellectual property.

Englund reckons there is a possibility that the trade war rhetoric might trigger some import hikes. Because companies might try to make more transactions before the tariffs take place, stocking inventories in case prices go up.

President Trump imposed 30 percent tariff on imported solar panels in January, so some American solar companies chose to stock the materials before the tariff took place. Thanks to the inventory purchased beforehand, Cypress Creek Renewables , one of the largest solar companies in the U.S., not only hasn’t laid off any workers because of the tariff, but also has landed six new projects from the New York State’s Renewable Energy Projects, which awarded $1.4 billion to 26 clean energy projects statewide, said Jeff McKay , a spokesman for the company.

Some economists believe that the narrowing of trade deficit might continue in the future, as the U.S. is exporting more and importing less. Exports of crude oil and other petroleum products increased 0.7 billion from February, while oil imports decreased $0.5 billion.

“The trade deficit should narrow because primarily our situation with petroleum has changed pretty considerably,” said Russell Price, senior economist from Ameriprise, adding that in recent years the U.S. has transitioned from a petroleum importer to a modest exporter in terms of refined petroleum products.


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