Plunging U.S. imports pushed trade deficit to three-year low in November
WASHINGTON – America’s trade deficit continued to tumble in November, hitting its lowest level in three years as imports of crude oil, computers and industrial supplies fell off sharply, the government reported Tuesday.
That put the United States on track for the first drop in the annual deficit in six years, likely reflecting the damage to international commerce from the U.S.-China trade conflict and a sluggish global economy.
Lowering the deficit has been a chief goal of President Donald Trump’s aggressive trade policy but whether the decline will be sustained remains in question.
The drop should help lift GDP growth for the final months of 2019 but falling imports are not necessarily a good sign, as it can be a sign of a weakening domestic economy.
The trade gap — the difference between what the United States buys from and sells to international trading partners — fell 8.2 percent in November to $43.1 billion, even lower than economists had expected and the lowest since October 2016, according to the Commerce Department data.
Imports fell 1.7 percent to $251.7 billion for the month, the lowest level in more than two years, as Americans purchased fewer mobile phones, artwork, civilian aircraft and computers.
Crude oil imports, adjusted for inflation and seasonal changes, were the lowest since records began in 1994, reflecting increased domestic supply, as America transformed in recent years to become the world’s largest producer.
Autos and parts bucked the trend, with imports rising $1.1 billion.
Exports rose but not enough to compensate for the drop in imports, rising 0.7 percent to $208.6 billion, as Americans shipped out more drilling and oilfield equipment, jewelry and gems, autos and aircraft engines.
Even that modest gain put exports at a new record.
But imports of services, an area where the United States typically enjoys an advantage over foreign competitors, also hit the highest level ever.
Ian Shepherdson of Pantheon Macroeconomics said the plunge in the U.S. deficit was not sustainable, particularly because U.S. demand is much stronger than the import figures suggest.
“This can’t last; we expect a rebound over the next few months, likely starting in February,” he said in an analysis.
But many of the trade barriers remain, including retaliatory tariffs on some U.S. goods.
Despite the November increase, Shepherdson said U.S. exports are “struggling,” Shepherdson said. He noted that excluding oil and aircraft, foreign goods sales had actually fallen sharply, which was in line with survey data pointing to continued declines.
The U.S. trade deficit has not decreased on a full-year basis since 2013, but over the first 11 months of 2019, it dropped 0.7 percent compared to the same period in the prior year.
Economists say falling imports could partly reflect the steep tariffs Trump imposed earlier on Chinese imports, even though last month he canceled plans for what threatened to be the most painful round of duty increases yet.
In November, the goods trade deficit with China fell 7.8 percent compared to October, and it is down 16 percent since the start of the year.
With Mexico, however, the goods deficit continued to rise, growing 8.7 percent compared to October, marking a year-to-date increase of nearly 28 percent.
Trump likens the trade deficit to stealing from America, but economists do not share this view, saying the United States does not produce enough domestically to meet its own needs.