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U.S. Trade With China Tumbled in September After Fresh Tariffs

U.S. Trade With China Tumbled in September After Fresh Tariffs

(Bloomberg) --

U.S. trade with China nosedived in September after President Donald Trump escalated the trade war with fresh tariffs on consumer items, deepening a slump for exporters on both sides of the Pacific.

Merchandise imports from the Asian country fell 4.9% from the prior month to $37 billion, the lowest in more than three years, while U.S. exports to China dropped 10% to a five-month low, according to data released Tuesday by the Commerce Department. That narrowed the deficit to a seasonally adjusted $28 billion.

U.S. Trade With China Tumbled in September After Fresh Tariffs

The overall U.S. trade deficit in goods and services shrank to a five-month low of $52.5 billion, in line with economists’ estimates. Overall exports decreased 0.9% to $206 billion while imports slid 1.7% to $258.4 billion.

The data reflect the Sept. 1 tariffs of 15% on about $110 billion in Chinese imports, largely hitting popular goods such as Apple watches, clothing, and shoes. Companies may have sought to avoid paying the higher prices by stocking up before the levies were imposed.

Policy swings are likely to sway trade numbers further in coming months. The U.S. and China agreed in October on the outlines of an initial trade accord and Trump waived a set of planned tariff increases. Officials are currently wrangling over the extent to which the Trump administration will roll back previous tariff increases before the sides sign the deal, according to people briefed on the discussions.

Without an agreement, another batch of levies may hit $160 billion in Chinese goods -- including laptops and mobile phones -- that’s still set to take effect in December.

New Location

Trump and Chinese leader Xi Jinping were forced to seek a new location to sign the so-called phase one trade deal after the Asia-Pacific Economic Cooperation summit in Chile was canceled amid political unrest there.

U.S. Trade With China Tumbled in September After Fresh Tariffs

Trade with China has tumbled since the tariff war began in earnest in 2018. In the first nine months of 2019, merchandise imports from China are down 13.5% and exports to the country have dropped 14.6%, according to Commerce Department data.

That’s narrowed the year-to-date goods deficit with China to $266.4 billion from $306.7 billion. While Trump might claim that as a victory, it’s come at a significant cost to farmers as well as U.S. companies who have been seeing slower orders and paying tariffs -- altogether weighing on the country’s record-long expansion.

Exports of soybeans -- which aren’t broken down by destination -- dropped by $1 billion during the month, while shipments of autos and parts fell by a similar amount. Meanwhile, imports of consumer goods, which hit a record in the prior month, decreased by $2.5 billion and capital goods were down $1.1 billion.

Oil Exporter

The U.S. has increasingly been getting a boost from domestic oil production and is now a net exporter. The data showed a petroleum surplus of $252 million in September -- the first reading in positive territory in figures going back to 1978 -- as imports declined. Excluding the commodity, the goods deficit narrowed to $70.8 billion from $72.8 billion.

Year to date, the trade deficit in goods and services has widened to $481.3 billion from $456.5 billion in the same period in 2018, driven by higher imports of services including travel and business services. Services imports hit a record high of $49.9 billion in September.

Analysts will use Tuesday’s figures to estimate potential revisions to third-quarter gross domestic product, which expanded at a 1.9% annualized pace, faster than expected. Net exports had subtracted 0.08 percentage point from that figure as the deficit widened slightly during the period. The first revision is due at the end of November.

Exports and imports of goods account for about three-quarters of America’s total trade; the U.S. typically runs a deficit in merchandise trade and a surplus in services.

©2019 Bloomberg L.P.