US trade deficit falls to level of May 2018

The US trade deficit in October declined to its lowest level since May 2018, as tariffs reduced imports from China, the Bureau of Economic Analysis (BEA) reported Thursday.

Overall, the trade deficit — the difference between imports and exports — fell 7.6 percent to a seasonally adjusted $47.2 billion from $51.1 billion in September. Exports totaled $207.1 billion, down 0.2 percent, and imports totaled $254.3 billion, down 1.7 percent, government figures showed.

Economists polled by Dow Jones expected the October trade deficit to be $48.5 billion.

"I think it's just a blip," Gary Hufbauer, a senior fellow and trade expert at the Washington-based Peterson Institute for International Economics, told China Daily. "The tariffs will, after six months, divert US imports to other sources, but won't permanently reduce the global trade deficit."

The trade deficit with China totaled $27.8 billion in October as tariffs limited imports. In the third quarter, the trade deficit with China fell $2.6 billion to $77.3 billion, the BEA reported.

US President Donald Trump has imposed tariffs on Chinese goods valued at about $360 billion as part of an ongoing trade dispute. He appears ready to add another 15 percent on additional goods valued at $165 billion if a trade agreement isn't reached by Dec 15. Washington and Beijing are working on a "phase one" trade agreement as the first step in resolving the impasse.

"The key story is that the sharp drop in non-oil goods imports in the past two months, totaling 4.1 percent, is not sustainable and will reverse soon," New York-based Pantheon Macroeconomics said Thursday in a research note to clients. "Almost two-thirds of the fall in core imports came in the consumer goods components, where the imposition of tariffs on Sept 1 appears to have triggered a steep but temporary drop.

"As they revert to the mean over the next couple of months, the deficit will rebound sharply, so it's dangerous to assume that the October data mean that net foreign trade will make a big positive contribution to Gross Domestic Product growth," the note said.

Imports of consumer goods decreased $2.4 billion in October, including a $400 million drop in cell phones, and a $300 million drop in both the clothing and toy sectors.

US exports fell to $207.1 billion from September's $207.6 billion, a decline of .02 percent. Exports of vehicles, aircraft engines and consumer goods fell in October, but the totals were skewed by a 40-day strike at General Motors and the grounding of Boeing's 737 MAX jetliner, the company's biggest seller.

Trump has threatened to impose new tariffs on goods imported from Argentina and Brazil after he accused them of devaluating their currencies to make their goods cheaper for American buyers.

Trump has said tariffs are needed to protect US companies from what he sees as unfair competition abroad. In October, the US had a $1.2 billion trade surplus with Brazil and a $4.7 billion trade surplus with South and Central America as a whole, US government statistics show.

Overall, the US economy is strong. Unemployment is near a 50-year low despite a worldwide economic slowdown and a lower rate of growth in the US.

Initial claims for state unemployment benefits fell 10,000 to a seasonally adjusted 203,000 for the week ended Nov 30 — the lowest since mid-April, the US Labor Department reported Thursday.