The U.S. trade deficit in February is expected to be in the same range as January, and that continuation could predict U.S. consumers will continue to buy at a high clip.

The median estimate from economists when polled by Bloomberg stood at a $67.6 billion deficit. January’s shortfall in goods and services trade totaled $67.4 billion, according to data from the Commerce Department. January’s numbers were largely the result of increased imports, and economists expect that trend to continue.

Beyond the headline numbers, there are plenty of metrics to watch in the upcoming report such as LNG exports, construction spending and auto imports.

Energy Prices

Energy prices are always at the heart of global trade trends. Petroleum imports have fallen since 2006, with the U.S. becoming a net exporter in 2020 according to the U.S. Energy Information Administration. Still, the country imported over 8 million barrels per day in 2022.

The January import average price per barrel of crude oil was $66.18, according to Census data. “Oil prices have been on an upward march since the start of the year. In nominal terms, we’re going to see some pressure on overall trade just from higher oil prices,” says Doug Porter, the chief economist at BMO Financial Group.

On the production side, the country exported 17.5% more liquefied natural gas in January compared to the year before. Porter adds a rise in domestic production could be an underlying area of strength going forward.

Construction Growth

President Joe Biden loves to talk about the American manufacturing boom. The Commerce Department just awarded Intel with $8.5 billion in direct funding along with loans under the CHIPS and Science Act to build facilities in Arizona, Ohio, New Mexico, and Oregon. Non-residential construction has boomed directly because of stimulus bills like the Infrastructure Reduction Act, according to the Treasury Department.

Total construction spending in manufacturing for February was up 38% from a year ago. Increased construction spending can indirectly trim the deficit, but it’s considered a long-term investment that takes years to show up. Still, one can look for signs in the upcoming report.

“The construction data is more tied to reshoring. Essentially, U.S. companies, rather than building a factory in China, are starting to invest domestically,” says Oren Klachkin, an economist at Nationwide.

Tariff Policies

Former President Donald Trump launched a trade war with China in July 2018, imposing tariffs to protect American businesses from alleged unfair trade practices. To avoid appearing weak against China, President Joe Biden has kept most duties in place. Those tariffs have increased costs for importers and led to a diversification away from Chinese import, according to a report from Wells Fargo.

“The tariffs did cause a reorganization of trade flows generally. They pushed those products towards other countries in Asia such as Vietnam and Taiwan,” says Shannon Grein, an economist at Wells Fargo.

A continuation, or elevation in the case of another Trump presidency, of these protectionist trade policies will continue to damper global supply chains. That in turn might lead to higher trade from other Asian countries and further nearshoring, which is something to look for in the report.

Automotive Industry

Imports of automotive vehicles, parts and engines were the most on record at $40.9 billion in the January report. Detroit hopes to boost domestic production after agreeing to a new contract with the United Auto Workers in November. In the first quarter of the year, Tesla badly missed car delivery estimates, prompting shares to slide 4.9% on Tuesday.

Grein wonders if the February report will offer a continuation or departure compared to the previous month. “Autos and components were up a lot in January, but I think it could be more noise than anything else,” she adds. 

Effects from the tragic collapse of the Francis Scott Key Bridge in March will not be visible on this report, but it will certainly have an effect in the coming months. The port is part of the supply chain for car brands like Mazda, Volkswagen and Jeep.

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