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US trade deficit narrows to smallest since 2016 on soybean exports

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The US trade deficit narrowed in May to its smallest since October 2016 on a jump in exports of soybeans and aircraft amid the threat of retaliatory tariffs.

[WASHINGTON] The US trade deficit narrowed in May to its smallest since October 2016 on a jump in exports of soybeans and aircraft amid the threat of retaliatory tariffs.

The gap decreased 6.6 per cent to US$43.1 billion, from a revised US$46.1 billion in the prior month, Commerce Department data showed Friday. Exports of goods and services climbed to a record high, outpacing a pickup in imports.

The trade data will remain closely watched for signs of any fallout from what threatens to become a protracted trade war with China, Europe and Canada. At the same time, rising demand by US households and businesses means purchases of foreign- made goods will probably remain resilient in coming months.

President Donald Trump has already imposed levies on imported steel, aluminum, solar panels and washing machines. Tariffs on US$34 billion of Chinese goods took effect Friday at 12.01 am in Washington, spurring retaliation from China.

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The median estimate of economists surveyed by Bloomberg called for a May trade deficit of US$43.6 billion.

The report also showed the trade gap with China, the world's second-biggest economy, widened to US$32 billion in May from US$30.8 billion.

Overall exports increased 1.9 per cent to US$215.3 billion as soybean shipments overseas almost doubled to US$4.1 billion. Exports of civilian aircraft, a category that tends to be volatile, rose US$1.9 billion in May.

Imports rose 0.4 per cent to US$258.4 billion, boosted by a record value of capital goods shipments from overseas.

Improvement in the trade gap may be a positive for second- quarter growth. Net exports subtracted 0.04 percentage point from gross domestic product growth of 2 per cent over the January-to-March period, according to revised figures, while previous estimates had shown a modest contribution.

After eliminating the influence of prices, which renders the numbers used to calculate GDP, the trade deficit shrank to US$75.3 billion, the smallest since March 2017, from US$77.5 billion in the prior month

Exports and imports of goods accounts for about three-fourths of America's total trade; the US typically runs a deficit in merchandise trade and a surplus in services.

BLOOMBERG