Trade Deficit Forecast

Economic Forecasts

Exports and Imports Set for Bigger Falls

Kiplinger's latest forecast on the direction of the trade deficit.

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The surprise narrowing of the U.S. trade deficit in February was reversed in March. The trade deficit in goods and services widened to a seasonally adjusted $44.4 billion from $39.8 billion in February — an increase of 11.6%. Trade in services remained in surplus at $21.2 billion, while the nominal goods deficit increased to $65.5 billion.

International trade will likely continue to decline in coming months. Both imports and exports fell in March. Imports fell 6.2% — the largest decline since the Great Recession. The decline reflected fewer purchases of consumer and automotive goods. Imports have now fallen in four of the past five months. Exports saw an even sharper fall of 9.6% as domestic restrictions were ramped up. The shutdown of most auto plants toward the end of the month resulted in a 20% monthly fall in exports of motor vehicles and parts. Exports of capital goods and industrial supplies also fell sharply. With the drop in March, exports of goods and services, which have held up fairly well in recent months, now seem to have caught up to the trend of falling imports.

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The impact of COVID-19 on trade will be more visible in April and subsequent months. Imports and exports will likely be rattled as the global economy continues to feel the effects of stay-at-home policies.

Trade’s contribution to second-quarter GDP growth will be negligible. Exports, which boost GDP growth, will likely stay flat in the second quarter. Net exports added more than one percentage point to real GDP growth in each of the past two quarters.

Sources: Department of Commerce, Trade Data