February’s trade deficit at $43.6 billion was lower than the expected reading. This was the result of a 1.8% fall in imports against a 0.2% increase in exports. Annually, the change in exports is now 6.7% higher, while imports were 4.5% higher. Meanwhile, the non-petroleum deficit slipped to $56.6 billion in February from $61.0 billion in January. The non–seasonally-adjusted volume of oil imports was higher in February at 235.3 million barrels after 258.9 million in January, though the unit price of imported crude oil rose by 3.0% in February after a 6.0% rise in January. Total petroleum exports increased by 8.6% in the month.
Beneath the headline figures, the bulk of this month’s increase in goods exports was largely the result of a $0.7 billion rise in exports of consumer goods and other goods ($0.5 billion). The $4.1 billion increase in goods imports, meanwhile, reflected an increase in consumer goods ($3.1 billion), automotive vehicles and parts ($2.6 billion), and industrial supplies and materials ($1.4 billion). Please see charts on page 2 for a breakdown of import and export growth during the current economic expansion.
What’s particularly interesting about the imports chart is the huge increase in automotive penetration (something that now seems to be peaking out as auto demand is softening), against the near-term slump in industrial supplies (related to the collapse in the commodities complex, which is tepidly starting to increase once again). Exports reflect similar trends, but not quite so stark. These will likely be topics that the Trump administration will discuss with President Xi Jinping during his visit to the U.S. at the end of the week, though how to encourage change will be difficult. A start would be to address the 25% tariff barrier that the Chinese continue to put on auto imports. The impact of a Trump infrastructure plan (whilst a good idea) may have less of a positive impact on the trade deficit than expected, particularly if there is strong Chinese participation that would be a capital inflow and done for the purposes of encouraging U.S. imports. Today’s report will be a positive for the first-quarter GDP report, currently estimated by the Atlanta Fed at just 1.2%.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.