The U.S. trade deficit in goods dropped dramatically in October as both exports and imports decreased, pointing to a continued decrease in trade flows that was criticized on the “America First” policy of Trump administration.
The Department of Commerce said last month the goods trade deficit declined 5.7 per cent to $66.5 billion.
After falling 1.3 per cent in September, exports dropped by 0.7 per cent. Exports have been devastated by a fall in food and feed shipments, probably soybeans. Automotive exports also dropped significantly and were likely weighed down by a General Motors (GM.N) 40-day strike undermining the production of motor vehicles.
Capital and consumer goods exports also declined. Industrial supply sales, however, grew.
Goods imports dropped by 2.4 per cent in October after declining by 2.1 per cent in the previous month, with increases in manufacturing products, motor vehicles and consumer goods purchases. Imports of capital goods have modestly recovered.
The narrowing trade gap is optimistic for gross domestic product measurement and indicates that trade will support the economy in the fourth quarter as growth slows by slowing consumer spending and continued business investment weakness.
But a worrying trend is the ongoing fall in both exports and imports. The protectionist trade policies of the White House left the United States involved in a trade war with China and imposed tariffs of tit-for-tat with other nations. The government claims that tariffs are needed in order to shield producers from unfair business practices from what it said.
Trade deducted 0.08 percentage point in the third quarter from GDP growth. The economy expanded at an annualized rate of 1.9 per cent in the quarter of July-September after extending in the second quarter at a rate of 2.0 per cent. For the fourth quarter, growth predictions are below a rate of 2.0 per cent.
The Department of Commerce also revealed on Tuesday that in October retail stocks increased by 0.3 per cent after achieving 0.2 per cent in the previous month. Inventories of motor vehicles and parts dropped 0.1 per cent in September after going up 0.1 per cent. The GM strike undoubtedly limited them.
Retail inventories, minus motor vehicles and accessories, the portion of gross domestic product measure rose 0.6 per cent after a 0.2 per cent increase in September.
Wholesale stocks rebounded last month by 0.2 per cent after decreasing in September by 0.7 per cent.
This month’s results showed a modest rebound in October’s retail sales and a significant decline in factory production. Because of the 16-month U.S .- China trad