Trade Deficit Forecast

Economic Forecasts

Trade Deficit Narrows for Third Consecutive Month

Kiplinger's latest forecast on the direction of the trade deficit.

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The U.S. trade deficit narrowed sharply in November. The trade deficit in goods and services shrank 8.2% in November to a seasonally adjusted $43.1 billion. That was the lowest goods-and-services deficit since October 2016. Year to date, the gap shrank 0.7% from the same period in 2018.

The modest improvement in exports reflects soft global demand. They rose 0.7%, while imports declined 1% from October. Goods exports were buoyed by food and beverages, capital goods and consumer goods. Auto exports also increased in November after the United Auto Workers union ended its 40-day strike at General Motors. Services exports, which comprise about a third of overall exports, rose 0.5%.

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November’s 1% drop in imports marked the third consecutive month of imports declining by one percentage point or more. The drop was due to lower imports of capital goods, such as computers; and consumer goods, such as cell phones. Total exports are up 0.3% from a year ago, while imports have declined 3.7%.

Overall trade volumes are on the decline as both imports and exports are down from 2018. Exports from the United States to our trading partners peaked in May 2018, just before American steel and aluminum tariffs went into effect in June of that year.

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The narrowing of the trade deficit should provide a modest boost to fourth-quarter GDP. The United States also appears to be closer to signing a phase-one trade deal with China. In exchange for China’s buying more U.S. agricultural products, the United States will roll back some of its tariffs on Chinese imported goods.

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Sources: Department of Commerce, Trade Data