Trade Deficit Forecast

Economic Forecasts

U.S. Trade Deficit Narrows as Both Exports and Imports Fall

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

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GDP 2019 growth will be 2.3%; 1.8% in 2020 More »
Jobs Job gains of about 150,000 per month in ’20 More »
Interest rates 10-year T-notes staying around 2% until trade war ends More »
Inflation 2.1% in ’19, up from 1.9% in ’18 More »
Business spending Up just 2% in ’19 amid uncertainty of trade war More »
Energy Crude trading from $50 to $55 per barrel in December More »
Housing 3.5% price growth by year-end ’19 More »
Retail sales Growing 4.3% in ’19 (excluding gas and autos) More »
Trade deficit Widening 7% in ’19 More »

The U.S. trade deficit narrowed in September to its lowest level in five months. The deficit in goods and services shrank 4.7% to a seasonally adjusted $52.5 billion. Both exports and imports declined, with the former falling 0.9% and the latter dropping 1.7%. The fall in trade volume is a reflection of slowing growth among major U.S. trading partners and the effects of the trade war with China.

Weakening demand abroad will likely weigh on U.S. exports in the fourth quarter. Exports are down 3.6% from a year ago, while imports have declined 4.9% over the same period. Consumer goods exports rose 2.9%, but the increase was offset by big declines in other exports. Exports were dragged down by a 7% plunge in motor vehicle shipments from the previous month, likely linked to the strike at General Motors that began in mid-September. Imports decreased across most major categories. Consumer goods imports were down 4.4% from the previous month and fell to the second-lowest level in 2019. Imports of cell phones, toys and apparel declined sharply. The weakness in the global economy indicates that exports will decline this quarter. The U.S. economy remains relatively strong, particularly compared with those of its main trade partners. As a result, the United States will keep drawing in imports from the rest of the world.

See Also: 10 Companies Already Hurt by President Trump's Tariffs

Despite the White House’s focus on shrinking the trade deficit, expect it to widen by 7% for 2019. Through the first nine months of the year, the gap stood at $481.33 billion, up 5.4% from the same period last year.

The possibility of a trade deal with China could eventually provide a boost to both exports and imports, particularly if the Chinese boost purchases of U.S. agricultural products and the Trump administration agrees to roll back some existing tariffs. Media reports suggest that the United States and China are making progress on the first phase of a comprehensive trade agreement.

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Sources: Department of Commerce, Trade Data