By Jeff Ferry, CPA Chief Economist
The US trade deficit in goods and services for February was $49.4 billion, an improvement of 3.4 percent over the January figure of $51.1 billion, providing more evidence that tariffs are reducing the US deficit. That’s according to figures published today by the Department of Commerce. Equally significant, our goods deficit with China came in at $24.8 billion, nearly $10 billion or 28.1 percent better than January’s $34.5 billion, and our best monthly China deficit figure since March 2017.
The China deficit in February tends to be smaller due to the Chinese New Year holiday, but the figures still provide evidence that tariffs are reducing our imports from China. Combining the January and February monthly bilateral deficits, our China deficit came in at $59.2 billion, 9.2 percent better than the comparable 2018 two-month figure. China’s retaliatory tariffs are having an impact on our exports, but that is outweighed by the impact of US tariffs on our imports of Chinese goods. A look at the February figures shows our goods exports to China fell by $1.4 billion (from year-ago February data) to $8.4 billion. Our goods imports from China fell by $5.9 billion.
Equally positive for the US economy was a notable improvement in our Advanced Technology Products trade, where the February deficit of $5.9 billion was a stunning 44 percent better than the January figure of $10.5 billion. This ATP deficit was also our best result for 23 months. These figures are not seasonally adjusted and should be treated with caution. But even compared to last February, our ATP deficit improved 25.3 percent from $7.9 billion. Compared to January, February ATP imports dropped $3.6 billion to $35.0 billion, while our ATP exports rose $1 billion to $29.1 billion. Unsurprisingly, the fall in imports was due mainly to the information and communications category, which includes technology and Internet products, much of which comes from China. The improvement in exports was due to a $1.5 billion jump in aerospace exports, to $11.2 billion for the month. However, many economists are worried that aerospace exports are likely to be weak this year as Boeing grapples with the technical and safety issues surrounding the 737 Max airplane.
On a bilateral basis, our goods deficit with Mexico jumped by $1.6 billion to $7.4 billion in February, driven mainly by our automotive trade, where our Mexican imports hit $10.5 billion. Our deficit with Japan worsened to $5.9 billion while that with Germany improved by $0.8 billion to $4.5 billion for the month. Our trade deficit with France shot up to $2.0 billion, the worst result since October 2017.
Looking at the European Union (EU) as a whole, our February deficit was $9.2 billion, 21.4 percent better than January’s figure. The Trump administration is widely reported to be considering negotiations on a trade deal with the EU. Historically, all such negotiations have provided an opportunity for the US export lobby and the US import lobby to attempt to reduce US and foreign tariffs—allto support their narrow corporate interests. Last year, our goods trade deficit with the EU was $169.3 billion, so from the perspective of the US national interest, an agreement that led towards narrowing that deficit would deliver broad benefits for the US economy and US jobs. On the historical record, such a trade deal is unlikely to happen, simply because our foreign “partners” are far more focused on designing a deal to benefit their domestic economy than US negotiators are, and they also are always ready to use non-tariff barriers and other ploys to frustrate the rules of the trade agreements when it benefits their domestic industries.
See the latest US monthly trade data in the new interactive CPA Trade Database.