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Business

US Trade Deficit in March Smallest in 16 Months

Paul Ashworth, chief U.S. economist at Capital Economics, discounted the big drop in imports in March, saying it mainly reflected the impact of China's Lunar New Year holiday

A sailboat makes its way past the container ship MSC Ivana as she is unloaded at the Port of Oakland in Oakland, California, photo: AP/Ben Margot
2 years ago

The U.S. trade deficit fell in March to the lowest level in 16 months as imports plunged by the largest amount since the depths of the recession seven years ago.

The trade deficit narrowed to $40.4 billion in March, a drop of 13.9 percent from February, the Commerce Department reported Wednesday. It was the smallest trade gap since November 2014.

Exports slipped 0.9 percent to $176.6 billion. Meanwhile, imports declined 3.6 percent to $217.1 billion as American demand for everything from autos to computers and toys fizzled. It marked the largest percentage drop since February 2009.

Trade is playing a major role in the current presidential campaign, with Republican front-runner Donald Trump vowing to punish countries such as China and Mexico for unfair trade practices.

For March, the politically sensitive deficit with China fell by 25.7 percent to $20.9 billion. Through the first three months of this year, the deficit with China is running 5.4 percent lower than the same period a year ago. Even with that drop, America’s trade gap with China remained the largest imbalance with any country.

In his campaign, Trump has accused China and other nations of pursuing unfair trade practices that have cost millions of American jobs. He has said that as president, he would seek to impose a 45 percent tariff on Chinese goods to try to halt the objectionable practices.

America’s deficit with the European Union jumped 31.9 percent to $13.1 billion. The deficit with Mexico increased 8.9 percent to $5.4 billion, and the deficit with Japan increased 25.6 percent to $6.7 billion.

The March drop in imports reflected declines in a number of categories, but it followed a big import rise in the previous month. Economists are forecasting that imports will keep rising this year. Demand is expected to be solid in a U.S. economy that is growing faster than many other parts of the world.

Paul Ashworth, chief U.S. economist at Capital Economics, discounted the big drop in imports in March, saying it mainly reflected the impact of China’s Lunar New Year holiday. He said Chinese producers ramped up shipments before the holiday, resulting in the jump in imports in February, and then took time off for the holiday.

Oil imports dropped 4.3 percent to $9.4 billion, the lowest level since September 2002. The decline reflected in part the sharp fall in global oil prices over the past year.

So far this year, the trade deficit is running 0.8 percent below the pace during the same period in 2015.

However, economists are forecasting the deficit will rise further this year as exporters continue to struggle. U.S. exporters have been hurt by a weak global economy and by the rising value of the dollar, which makes American goods more expensive in overseas markets.

A larger trade deficit acts as a drag on growth because it means America is buying more from foreign countries than it is exporting.

Republican U.S. presidential candidate and businessman Donald Trump waves after speaking to supporters after his rival, Senator Ted Cruz, dropped out of the race for the Republican nomintion following the results of the Indiana state primary, at Trump Tower in Manhattan, New York, U.S., May 3, 2016. REUTERS/Lucas Jackson

Republican front-runner Donald Trump is vowing to punish countries such as China and Mexico for unfair trade practices. Photo: Reuters/Lucas Jackson

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