US trade deficit dips to $68.9 billion with exports up

WASHINGTON (AP) — The US trade deficit narrowed in April to $68.9 billion as an improving global economy boosted sales of American exports.

The April deficit, the gap between what America buys from abroad and what it sells to other countries, was down 8.2 per cent from a record March deficit of $75 billion, the Commerce Department reported Tuesday.

The improving economic situation overseas drove up demand for American goods while domestic demand for imports slowed.

In April, exports of US goods and services rose 1.1 per cent to $205 billion while imports declined 1.4 per cent to $273.9 billion. Part of the boost in exports came from a $1.4 billion increase in sales of civilian aircraft, a positive sign that a rebound in air travel from depressed pandemic levels is prompting stronger sales of jetliners.

The drop in imports reflected a $1.1 billion decline in purchases of foreign-made autos and auto parts.

Through the first four months of the year, the US trade deficit totals $281.7 billion, up 50.4 per cent from the deficit during the same period in 2020, a time when the US economy was essentially shut down because of the coronavirus pandemic.

The politically sensitive deficit with China fell to $25.8 billion in April, down 6.7 per cent from the March imbalance. But through the first four months of this year, the deficit with China, the largest the United States runs with any country, was up 37.1 per cent over the same period a year ago.

The deficit in just goods in April totalled $86.7 billion while the surplus in services totalled $17.8 billion. The United States runs surpluses in services trade which help lower the goods deficit. However, the services economy, which includes travel payments such as airline fares, has been hit hard by the coronavirus with the service surplus down 16.2 per cent so far this year compared to the same period a year ago.

While many economists are forecasting that the trade deficit will continue to drop in coming months, some analysts are worried that the recovering US economy will continue to favor foreign-made products.

“Domestic demand is roaring back amid reopening and a rapidly improving health backdrop,” said Mahir Rasheed, U.S. economist at Oxford Economics. “The trade deficit is poised to widen further as the fiscally powered, consumer-driven recovery in the US runs ahead of the global economic rebound.”

But Michael Pearce, senior US economist, said he believed trade would provide a slight boost to overall economic growth in the current April-June quarter, helped by an improving performance of US exports. That would be an improvement from the big drag to economic growth from trade in the first quarter.

During his four years in office, Donald Trump pursued a get-tough trade strategy that used punitive tariffs on other country’s exports in an effort to lower America’s huge trade deficits with the rest of the world, which he blamed for the loss of millions of American manufacturing jobs.

But Trump’s efforts failed to alter the trade imbalances. So far, the Biden administration has left most of the penalty tariffs in place as his administration works to determine the approach it will take to trade.