January’s trade deficit at $48.5 billion matched the expected reading, but was nonetheless the largest deficit since March 2012. This was the result of a 2.3% rise in imports against a 0.6% increase in exports. Annually, the change in exports is now 7.4% higher, while imports were 8.3% higher. Meanwhile, the nonpetroleum deficit jumped to $61.3 billion in January from $58.3 billion in December. The non–seasonally-adjusted volume of oil imports was higher in January at 258.9 million barrels after 238.3 million in December. Though, the unit price of imported crude oil rose by 6.0% in January after a 1.5% rise in December. Total petroleum exports increased by 13.6% in the month.
Beneath the headline figures, the bulk of this month’s increase in goods exports was largely the result of a $2.1 billion rise in exports of industrial supplies and materials (including other petroleum and crude oil) and automotive vehicles and parts ($1.3 billion). The $5.1 billion increase in goods imports, meanwhile, reflected an increase in consumer goods ($2.4 billion), industrial supplies and materials ($1.0 billion), and automotive vehicles, parts, and engines ($0.9 billion).
The deficit’s quarterly contribution to GDP in 2016 was extremely volatile, but for the year as a whole it was essentially flat. The strength in the dollar since the election, coupled with the strong increase in animal spirits following, suggests that it will be difficult for the deficit to provide the kind of economic tailwind that the Trump administration is hoping for. It should also be remembered that protectionist measure geared toward shrinking the current account surplus will necessarily be accompanied by a shrinking of the capital account surplus, which might be difficult to achieve when planning big fiscal expenditures and given that the dollar is the world’s reserve currency of choice.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.