US trade deficit narrows most on record on muted China imports

THE US trade deficit fell in April by the most on record in dollar terms, reflecting a drop in the value of imports amid Covid lockdowns in China while exports climbed.

The gap in goods and services trade narrowed US$20.6 billion to US$87.1 billion, Commerce Department data showed on Tuesday. The median estimate in a Bloomberg survey of economists called for an US$89.5 billion deficit. The figures aren’t adjusted for inflation. 

Imports dropped in April as factory activity in China fell to the lowest level since February 2020 amid strict lockdowns to curb the spread of Covid-19. While manufacturing in the country has improved somewhat since, the measures are still straining already-tenuous global supply chains, especially when coupled with Russia’s war in Ukraine.

Decades-high inflation is expected to weigh on trade this year, with the World Trade Organisation cutting its forecast for growth in global merchandise volumes. So far though, in the US, that hasn’t materialised yet, judging by the near-record amounts of goods that arrived at the ports of Los Angeles and Long Beach in April.

In the first quarter, the widening of the trade deficit largely explained the economy’s worst performance since the pandemic recovery began, with gross domestic product shrinking at a 1.5 per cent annual pace. That’s because the value of products American businesses and consumers bought from overseas outpaced purchases of US goods and services by other economies. BLOOMBERG