Washington (Bloomberg): The US trade deficit narrowed in 2019 from the widest in a decade, reflecting plunges in shipments from China and oil imports. It gives President Donald Trump some evidence he’s delivered on pledges to reduce the gap.
The annual deficit in goods and services decreased for the first time in six years, narrowing 1.7 per cent to $616.8 billion. While Trump frequently cites the deficit as evidence of the failure of his predecessors’ trade policies - even though most economists don’t dwell on the indicator - the gap remains more than 20 per cent wider than before he became president.
That reflects steady gains in American consumer spending, which drives imports.
The annual merchandise-trade deficit with China - the principal target of Trump’s trade war - narrowed 17.6 per cent to $345.6 billion after hitting a record in 2018. Imports from the country slumped 16.2 per cent, exceeding the drop in 2009 during the global financial crisis, while shipments to China declined 11.3 per cent, the biggest drop since at least 2003.
That pushed China down to third place among America’s top trading partners for goods in 2019, as Mexico vaulted to the top spot, slightly ahead of Canada. The merchandise deficits with Mexico and the European Union hit records, while the US surplus in services declined by 4 per cent to $249.2 billion as imports gained.
Waiting for trade deal to deliver
“The phase-one trade deal is likely to have an impact on the composition of trade flows, but not the overall net position,” said Eliza Winger at Bloomberg Economics. “The boost to exports growth, however, will be delayed by the coronavirus outbreak.
“Overall, we estimate exports will add no more than 20 bps to GDP in 2020, and for net trade to continue to subtract from full-year growth.”
* On January 29, President Trump signed a new trade pact with Canada and Mexico into law, extending the life of the trading bloc created by Nafta in the 1990s with some significant updates.
* The White House is now turning its attention to scrutinizing trade links with other nations and regions, including the UK, Africa and the European Union.