US January trade deficit down 14% to $51 billion

The US trade deficit dropped to $51 billion, further than $57 billion expected by financial experts in January as exports increased, according to data from the US Commerce Department. The deficit decreased to its lowest levels since March 2018.

US trade deficit: key figures

Why did the US trade deficit decrease?

The US trade deficit dropped on the strength of exports increasing in January. There was a growth in exports of auto parts, cars, and trucks. The goods deficit fell to $73.3 billion, plummeting 10%. The services surplus rose to $22.1 billion.

The US-China trade war led to a decline in exports in December 2018. The US imposed $250 billion of tariffs on Chinese goods, while China retaliated with $110 billion on US imports. Now the US-China trade deficit is narrowing by falling to $33.2 billion, down $5.5 billion in January.

As the two nations are renegotiating a trade deal, US exports grew by $1.9 billion to $207.3 billion as soybean exports to China rose to $1.21 billion. Though the crop exports increased to the Asian nation, it was the lowest amount since 2010.

US imports fell to $258.5 billion, especially in computers, computer accessories and crude oil. The cost of imported oil fell as domestic production of the commodity has increased. Imports of oil fell to its lowest levels since 2016.

What does the US trade deficit mean for the US economy?

The US trade deficit decreasing is a win for US President, Donald Trump, who said that he would reduce the goods imbalance while in office. However, economists like Michael Pearce from Capital Economics, says that the decline in imports may not be a benefit to the economy.

‘The sharp fall in the trade deficit in January was mainly due to a larger than expected drop in imports, which is hardly a positive sign for the economy', said Pearce.