Trucks wait to be loaded with shipping containers at the Port of Savannah in Savannah, Georgia, U.S. (Photographer: Ty Wright/Bloomberg)  

U.S.-China Trade Gap Shrank in March to Smallest Since 2016

(Bloomberg) -- The U.S. trade deficit with China decreased to the narrowest in almost three years as imports slowed and exports advanced, offering President Donald Trump a chance to claim his tariff war is yielding the desired results just as negotiations reach a critical stage.

The merchandise gap with China shrank to $28.3 billion in March, according to a Commerce Department report Thursday that also showed the overall U.S. deficit in goods and services widened to $50 billion. That nearly matched the $50.1 billion estimate in Bloomberg’s survey.

U.S.-China Trade Gap Shrank in March to Smallest Since 2016

Overall exports increased 1% to $212 billion, boosted by a 39% jump in soybean shipments. Imports climbed 1.1% to $262 billion on gains in oil, food, vehicles and pharmaceuticals. The overall merchandise-trade deficit widened 0.7% to $72.4 billion.

While tensions between the world’s two largest economies flared this week after Trump upended months of talks with threats of fresh levies, the two sides had been signaling most of this year they were nearing an accord. China’s top negotiator was due in Washington Thursday to continue the discussions before tariffs rise Friday.

The narrower gap with China obscures a sharp drop in trade between the nations. Imports from the Asian country dropped 13.6% in the first quarter from a year earlier, to $118.8 billion, while exports plunged 17.6% to $27.2 billion. For March, exports were the highest since mid-2018 while imports were the lowest since 2016.

“While it is in both countries’ best interest to strike a deal, China is suffering disproportionately,” Jacob Oubina, senior U.S. economist at RBC Capital Markets LLC, said in an email Thursday. “Perhaps this reality will push them across the finish line.”

What Bloomberg’s Economists Say

“Rising imports are unsurprising given that previously released data showed a pickup in both consumer and business demand in the March-April period. Increasing exports -- particularly in light of ongoing appreciation in the dollar -- are more impressive, and signal improving global demand.”
-- Carl Riccadonna and Yelena Shulyatyeva, economists
Click here for the full note.

Net exports have helped boost U.S. growth, adding a full point to first quarter gross domestic product after previously dragging on the expansion. Still, exporters have been confronting a dimmer outlook for global growth, while an inventory overhang may weigh on imports.

The data may be starting to reflect some fallout from the global grounding of Boeing Co.’s 737 Max jet after a second crash in March, with civilian aircraft exports decreasing to $5.1 billion from $5.8 billion. In February, the trade gap had unexpectedly narrowed on a surge in that category.

China, meanwhile, reported earlier this week that April exports to the U.S. fell 13.1% from a year earlier in dollar terms. That was the most since 2009 outside of January or February, months distorted by the timing of Lunar New Year. Global exports from the country dropped 2.7% as imports expanded by 4%.

The March U.S. trade data followed two months of a narrowing trade gap, with a revised $49.3 billion deficit in February that was slightly smaller than initially reported.

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  • On an unadjusted basis, the merchandise trade deficit with Mexico rose to a record $9.5 billion, while the gap with Europe increased by more than half, to $14.2 billion.
  • The real petroleum gap widened to $8.1 billion as exports and imports both increased.

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