As the exports rose to a record high, the U.S. trade deficit fell to a seven-month low in April, lifted by an increase in shipments of industrial materials and soybeans.
On Wednesday, the Commerce Department said that the trade gap has dropped 2.1 percent to $46.2 billion which is the smallest since September. Data for March was revised to show the trade deficit falling to $47.2 billion, instead of the previously reported $49.0 billion.
When adjusted for inflation, the trade gap narrowed to $77.5 billion from $78.2 billion in March. The so-called real trade deficit is below its $82.5 billion average in the first quarter.
Strong data ranging from manufacturing to consumer spending and the labor market have led the Federal Reserve Bank of Atlanta to estimate that economic growth in the second quarter will top a 4.0 percent annualized rate. The economy grew at a 2.2 percent pace in the first quarter.
However, the trade policy followed by the President is like a threat to the economy.In March, he announced tariffs for steel and aluminum imports to protect domestic industries from what he says is unfair competition from foreign producers.
In the last week, Trump extended the duties to steel and aluminum imports from Canada, Mexico and the European Union. Mexico has retaliated with measures targeting a wide range of U.S. farm and industrial products. Canada has said it would slap tariffs on imports from the United States, including whiskey, orange juice, steel, aluminum and other products.
The trade war between Washington and Beijing have threatened tit-for-tat tariffs on goods worth up to $150 billion each.
It is claimed by Trump that United States is being taken advantage of by its trading partners, but economists warn that tariffs will hobble the economy, raising prices and destroying jobs for Americans.
Economists say that tariffs will do little to shrink the trade deficit, partly because of the dollar’s status as the global reserve currency and the low U.S. savings rate, including a fiscal deficit that has been blown up by a $1.5 trillion tax cut package.
The politically sensitive goods trade deficit with China increased 8.1 percent to $28.0 billion in April. The deficit with Mexico narrowed 29.8 percent to $5.7 billion in April. The United States had a $0.8 billion goods trade deficit with Canada in April.
In April, exports of goods and services rose 0.3 percent to a record $211.2 billion. Exports have now increased for three straight months. They were in April supported by a $1.3 billion increase in deliveries of industrial supplies and materials such as fuel oil and petroleum products.
The exports to China dropped by 17.1 percent in the month.
Imports of goods and services slipped 0.2 percent to $257.4 billion in April. Imports of consumer goods dropped $2.8 billion, weighed by a $2.2 billion decline in imports of cellphones and other household goods. Motor vehicle imports also fell by $1.0 billion.