The U.S. trade deficit narrowed sharply in January, falling by more than half from a year earlier in a report that offered the clearest sign yet of how dramatically America’s trade position has shifted during President Donald Trump’s first year back in office.
The Commerce Department said Thursday that the goods and services deficit fell to $54.5 billion in January, down from $128.4 billion in the same month a year ago. That marked a decline of $73.9 billion, or 57.6 percent.
Exports rose to $302.1 billion in January, up $28.4 billion, or 10.4 percent, from a year earlier. Imports fell to $356.6 billion, down $45.5 billion, or 11.3 percent.
The improvement was especially striking in goods trade, where the deficit fell to $81.8 billion from $155.6 billion a year earlier. Goods exports climbed to $195.5 billion from $173.4 billion, while goods imports dropped to $277.3 billion from $329.0 billion.
The January figures suggest that the administration’s tariff-centered trade strategy coincided with a major narrowing in the trade gap over the past 12 months, even as critics warned that higher import duties would raise costs without shrinking the country’s trade deficit.
From December, the overall trade deficit fell by $18.4 billion from a revised $72.9 billion. Exports rose $15.8 billion on the month, while imports slipped $2.6 billion.
The January gain in exports was led by industrial supplies and materials, including nonmonetary gold and other precious metals, as well as capital goods such as computers and civilian aircraft. Imports were pulled lower by declines in consumer goods, especially pharmaceuticals, and by weaker automotive imports.
The services surplus widened to $27.3 billion in January from $26.3 billion in December, while the goods deficit narrowed by $17.5 billion from the prior month.
Adjusted for inflation, the real goods deficit fell to $83.9 billion in January from $97.9 billion in December, as real goods exports rose 7.4 percent and real goods imports fell 1.3 percent.
Among major trading partners, the U.S. goods deficit with the European Union narrowed to $6.1 billion in January from $11.1 billion in December. The deficit with Mexico shrank to $12.8 billion from $15.4 billion, while the gap with Canada narrowed to $4.3 billion from $8.0 billion. The deficit with China edged up to $12.5 billion from $12.2 billion.
The January report may take on added significance because it captures trade flows before later disruptions from the Supreme Court’s decision striking down many Trump tariffs and before the outbreak of war in Iran at the end of February. That leaves it as one of the last clean snapshots of the trade balance after a year of Trump’s policies but before those new shocks began to reshape global commerce.
Read the full article here