The US trade deficit decreased 1.7% previous year to $ 616.8 billion

Daniel Fowler
February 5, 2020

The narrowing of the U.S. trade gap - the stated goal of Trump's trade policy - comes after a year when the deficit reached its highest level in a decade.

The deal envisioned that China would increase purchases by $76.7 billion in the first year and $123.3 billion in the second year, above a 2017 baseline of imports from the United States. Trump has imposed tariffs on $360 billion worth of Chinese imports in a battle over Beijing's aggressive drive to challenge American technological dominance. Last year, Brazil's trade surplus was US$ 46.7 billion.

The White House has also sparred with other trading partners, including the European Union, Brazil and Argentina, accusing them of devaluing their currencies at the expense of USA manufacturers.

And while shrinking the deficit was the goal of Trump's trade policy, it is not necessarily good news because a drop in exports often reflects a slowing economy.

Data for November was revised to show the gap tightening to $43.7 billion instead of $43.1 billion as previously reported.

Trade added nearly 1.5 percentage points to GDP growth in the fourth quarter, exceeding the 1.20 percentage points contribution from consumer spending, which accounts for more than two-thirds of USA economic activity.

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The report came on the heels of a survey from the ISM on Monday showing manufacturing rebounded in January after contracting for five straight months. But imports fell more, slipping 0.4% to $3.1 trillion. Private payrolls were likely flattered by unusually mild weather and a seasonal quirk, amid signs that overall job growth has slowed.

The dollar rose against a basket of currencies, while prices of U.S. Treasuries fell.

Larry Kudlow told a Fox television program on Tuesday that an expected export boom from the US-China trade deal "will take longer" because of the fast-spreading virus. "[Tariffs] increase costs for consumers, they make us less competitive [and] they take away money from shoe companies and retailers that could be invested in other capital investments".

Economists believe a 15% tariff on $110 billion worth of Chinese goods that came into effect on September 1 had weighed on imports in the prior months.

The real's slide to record lows against the USA dollar in recent months has failed to boost Brazilian exports, which have been hit by slowing global trade, U.S. Imports decreased $12.5 billion or 0.4%.

In December, the overall trade gap widened 11.9% to $ 48.9 billion as exports increased 0.8% to $ 209.6 billion and imports increased 2.7% to $ 258.5 billion rose.

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