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US Trade Deficit with China Increases in April

June 06, 2019

By Steven L. Byers, PhD, CPA Senior Economist

The US international trade deficit in goods and services for April 2019 declined slightly to $50.8 billion, down $1.1 billion from $51.9 billion (revised) in March. US goods exports fell $4.4 billion, and services declined by $185 million. US goods imports declined $5.4 billion, and services fell by $297 million. However, in a surprise reversal from the March trade figures, the Department of Commerce reports that the US goods deficit with China worsened in April, increasing by $6.2 billion from March’s $20.7 billion, to $26.9 billion.

In every month since October 2018, America’s goods trade deficit with China had declined. (The October 2018 figure was $43.1 billion.) So the sudden reversal warrants further consideration. With bilateral trade talks between the Trump administration and Beijing wavering for several months now, there is no agreement in sight between the two economic giants. The Trump administration threatened to increase tariffs, and now will be increasing them from 10% to 25% on $200 billion of imports from China. US importers, sensing that trade talks may be taking a turn for the worst, most likely increased imports from China (known as “front running”), with the belief that the threatened tariff increases will happen soon.

The administration has now started the regulatory process to impose tariffs of up to 25% on another $300 billion of imports from China. That covers most of the remainder of goods not currently subject to tariffs.

Regarding America’s other trading partners, the US bilateral goods trade deficit with all of Europe increased $3.6 billion, to $17.9 billion, driven primarily by a drop in exports. The news was mixed regarding Canada and Mexico. The goods deficit with Canada increased by $1.07 billion, but decreased with Mexico by $2.3 billion. A large decrease in exports to Canada compared with slightly smaller imports, drove the goods balance from a positive $365 million in March to -$706 million in April. Even with production migrating from China to Mexico as tariffs on Chinese imports take hold, America’s imports from Mexico decreased $1.8 billion while exports to Mexico increased by $536 million.

The situation for US agricultural producers continues to worsen. Exports of agricultural commodities fell $815 million in April, with imports increasing $144 million. Vegetables and fruits were hit the hardest among the major agriculture commodities, followed by fish and preparations. Recognizing the troubles that agricultural producers are facing, the Trump administration announced on May 23 that the US Department of Agriculture (USDA) will take several actions to assist farmers, including three separate programs providing up to $16 billion in programs designed to shore up the agricultural sector. CPA continues to support a more robust and permanent agro-industrial strategy to fix low prices in farm and ranch agriculture.

 


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