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U.S. Trade Deficit Narrows to Smallest Since 2016 on Soybean Exports

All eyes on trade numbers as U.S., China fire their first shots in the escalating global trade war.

U.S. Trade Deficit Narrows to Smallest Since 2016 on Soybean Exports
A harvest of soyabeans (Photographer: Paulo Fridman/Bloomberg)

(Bloomberg) -- The U.S. trade deficit narrowed in May to its smallest since October 2016 on a jump in exports of soybeans and aircraft amid the threat of retaliatory tariffs.

The gap decreased 6.6 percent to $43.1 billion, from a revised $46.1 billion in the prior month, Commerce Department data showed Friday. Exports of goods and services climbed to a record high, outpacing a pickup in imports.

The trade data will remain closely watched for signs of any fallout from what threatens to become a protracted trade war with China, Europe and Canada. At the same time, rising demand by U.S. households and businesses means purchases of foreign- made goods will probably remain resilient in coming months.

President Donald Trump has already imposed levies on imported steel, aluminum, solar panels and washing machines. Tariffs on $34 billion of Chinese goods took effect Friday at 12:01 a.m. in Washington, spurring retaliation from China.

The median estimate of economists surveyed by Bloomberg called for a May trade deficit of $43.6 billion.

The report also showed the trade gap with China, the world's second-biggest economy, widened to $32 billion in May from $30.8 billion.

Overall exports increased 1.9 percent to $215.3 billion as soybean shipments overseas almost doubled to $4.1 billion. Exports of civilian aircraft, a category that tends to be volatile, rose $1.9 billion in May.

Imports rose 0.4 percent to $258.4 billion, boosted by a record value of capital goods shipments from overseas.

Improvement in the trade gap may be a positive for second- quarter growth. Net exports subtracted 0.04 percentage point from gross domestic product growth of 2 percent over the January-to-March period, according to revised figures, while previous estimates had shown a modest contribution.

Other Details

  • After eliminating the influence of prices, which renders the numbers used to calculate GDP, the trade deficit shrank to $75.3 billion, the smallest since March 2017, from $77.5 billion in the prior month
  • Exports and imports of goods accounts for about three-fourths of America’s total trade; the U.S. typically runs a deficit in merchandise trade and a surplus in services

©2018 Bloomberg L.P.