Published: Fri, December 06, 2019
Markets | By Otis Pena

U.S. trade gap narrows to $47.2 billion in October

U.S. trade gap narrows to $47.2 billion in October

Motor vehicle parts imports accounted for most of the drop, likely reflecting the GM strike, which undercut motor vehicle production.

Imports of trucks, busses and passenger cars fell by $1 billion. The year-to-date US goods deficit with China has narrowed to a seasonally adjusted $294.2 billion from the same 10 months of 2018, the report showed. "To be sure, Canadian shipments of farm, fishing and intermediate food products fell 10.9% in October as exports of soybeans to China plummeted - recall that the Middle Kingdom started blocking Canadian imports of the stuff back in April".

The overall trade deficit tumbled 7.6 per cent to US$47.2 billion (S$64.3 billion) in October - below what economists had been expecting and the lowest level since May past year - from US$51.1 billion in September, the report showed. Exports in October edged down to US$207.1 billion as foreign buyers took in fewer US-made aircraft engines and industrial supplies.

Robert Kaplan, president of the Federal Reserve Bank of Dallas, also expected USA economic growth to "be weak" in the fourth quarter as businesses cut inventories due to trade uncertainty.

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In total, the USA now has tariffs on about $360 billion of Chinese imports and is scheduled to add 15% tariffs on another $165 billion or so of imports on December 15, unless the two sides strike a deal.

Trade with China continued to slide as the world's two largest economies maintained costly tariffs on each other's goods, according to the monthly Commerce Department report.

Imports of Chinese goods fell in October as the USA imposed new tariffs on consumer goods, and the overall trade deficit narrowed on a drop in imports and exports. Higher interest rates in the US compared with overseas make the USA dollar more attractive, pushing up the value of the dollar compared with foreign currencies.

In October, the United States ran a $68 billion deficit in the trade of goods such as autos and appliances. So far the US has imposed new or higher tariffs on about $360 billion of Chinese imports. "Trade remains sturdy and unlikely to add or subtract meaningfully from Q4 growth", Robert Kavcic, a senior economist at BMO Capital Markets, said in a note. The economy grew at a 2.1% pace in the third quarter. Imports of Chinese goods shrank by $1.8 billion to $35.3 billion. Economists polled by Reuters had forecast the trade gap narrowing to $48.7 billion in October. The effects of the General Motors strike clearly showed up in the report with both exports (- 2.9%) and imports (-3.3%) of motor vehicles/parts registering sizeable declines. But there were increases in oil exports, with the petroleum surplus the highest on record.

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