U.S. trade deficit plunges to $43.6 billion in February
Economist: Chinese New Year holiday led to fewer exports after jump in Jan.
WASHINGTON - The U.S. trade deficit declined sharply in February as imports from China fell by a record amount and American exports rose for a third straight month.
The deficit fell to $43.6 billion in February, 9.6 percent below January’s deficit of $48.2 billion, the Commerce Department reported Tuesday. Exports rose a tiny 0.2 percent to $192.9 billion. Imports dropped 1.8 percent to $236.4 billion as the flow of Chinese goods tumbled by $8.6 billion, led by a big drop in cellphone imports.
The politically sensitive trade deficit with China narrowed in February to $23 billion, 26.6 percent below the January total. President Donald Trump, who was sharply critical of Chinese trade practices during last year’s presidential campaign, will hold his first meeting with Chinese President Xi Jinping later this week in Florida.
In a tweet last week, Trump said that his meeting at Mar-a-Lago with the Chinese leader would be “a very difficult one in that we can no longer have massive trade deficits and job losses.”
During the campaign, Trump attacked China for pursuing unfair trade practices such as manipulating its currency.
He said that if China did not reform, his administration would impose punitive tariffs on Chinese imports. So far, Trump has not followed through on those threats. But his meetings with Xi on Thursday and Friday could prove pivotal in determining the administration’s future course in relations with China.
The small rise in exports in February was led by U.S.-made autos and autos parts, which climbed 1.5 percent to the highest level since July 2014. Exports of petroleum products were up 8.6 percent. Those gains helped offset declines in exports of commercial airplanes, farm products and industrial engines.
Paul Ashworth, chief U.S. economist at Capital Economics, said that January deficit jump followed by the sharp improvement in February reflected the effect of the Chinese New Year holiday. That prompted Chinese producers to accelerate deliveries of their products in January to get ahead of the shipping shutdowns that occurred because of the holiday.
“As things stand now, the monthly data point to a 3 percent annualized gain in real exports in the first quarter and a more modest 2 percent increase in real imports,” Ashworth wrote in a research note. “As a result, we expect net external demand to make a modest positive contribution to overall GDP growth.”
Ashcroft forecast first quarter GDP growth at 1.7 percent, down slightly from the 2.1 percent gain in the fourth quarter.
American manufacturers have struggled for more than a year with economic weakness in major export markets and a rising value of the dollar, which makes U.S. goods less competitive in foreign markets. However, economists believe both of those trends may ease in 2017, helping to lift the fortunes of American exporters.