The Bureau of Economic Analysis (BEA) reports a much lower trade deficit than all economists predicted. This is good news for the upcoming GDP growth report because the value of imported goods are deducted from GDP.
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $49.4 billion in February, down $1.8 billion from $51.1 billion in January. (read more)
The smaller overall trade deficit was primarily driven by a decrease in the deficit with China. The deficit with China decreased $3.1 billion to $30.1 billion in February. As noted by Reuters: ““It sounds like pencils are being sharpened in order to revise up first-quarter GDP forecasts,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.“
With little inflation in the U.S. economy it appears Trump’s tariffs on Chinese goods are essentially invisible to the consumer; likely being absorbed overseas in an effort to keep their prices low upon delivery. As the Trump administration negotiates on the world’s first ever Free Trade Agreement with China, the willingness/ability to execute additional tariffs provides ongoing leverage.