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US trade deficit widens, despite tariffs

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05/10/2019 | 10:23am EDT

While exports rose in March, imports grew faster. The US trade deficit is up 1.5% to $50 billion, but the deficit with China falls to lowest point in 3 years.

This is certainly good news for Donald Trump. The U.S. trade deficit increased in March, but less than expected. And the goods deficit with China, hit by a new round of tariffs, fell sharply to its lowest level in three years.

The goods and services deficit stood at $50 billion, with exports up 1% and imports up 1.1%, according to the Department of Commerce. The goods deficit with Beijing fell by 6.2% to $28.3 billion. Imports of Chinese goods fell by 1.2% to $38.8 billion.

These figures were published a few hours before the resumption of trade talks between the United States and China in Washington and a day before POTUS raised tariffs on $200 billion worth of Chinese products.

However, markets remained rather calm today, and this new trade deficit data could be one of the factors that contributed to this cold-blooded reaction.

But there is a second explanation: a container ship filled with Chinese equipment subject to customs duties entering an American port after the fateful 00:01 AM schedule on May 10 will not have its goods taxed at 25%, but at the previous rate of 10%. The USTC (Office of the US Trade Representative) has specified in a notice that Chinese products covered by the surcharges introduced in September 2018 which were exported before May 10, 2019 are not subject to the 25% additional duty as long as they are imported into the United States before 1 June 2019. In other words, goods currently at sea remain subject to the 10% rate. Most importantly, this period until June 1 offers almost 3 additional weeks of negotiations to seal an agreement before the new rate comes into effect.

The US as a net exporter of petrol

Although investors focus on the ongoing developments with China, Wells Fargo points out that there is a worthy development in the trade data that is going largely unnoticed: the emergence of the United States as a global petroleum powerhouse and the trend toward becoming a net petroleum exporter.  “In just the first three months of the year, U.S. crude oil exports totaled $14.1 billion, compared to just $8.4 billion in the same period last year. Meanwhile crude oil imports totaled just $30.5 billion versus $38.7 billion in the first three months of 2018.”

Source: U.S. Department of Commerce and Wells Fargo Securities

Romain Fournier
© MarketScreener.com 2019
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