Today’s data showed the US trade deficit narrowed to $50.8 billion in April. Analysts at Wells Fargo explained April data no not reflects recent trade tensions escalation and warned about broad-based slowing in trade.
Key Quotes:
“Today’s trade report offers data on net exports through April, which is to say, prior to the recent escalation in the trade war in May and June. So the proposed 25% tariff on just about all goods coming in from China and new tariffs on goods from Mexico, which could go into effect next week were not even part of the conversation during the period covered by today’s report.”
“What the report does tell us is that trade slowed in April. Total exports and total imports both fell 2.2% in April, but because the United States imports much more than it exports the dollar effect was a narrowing in the budget deficit.”
“The United States exported less of almost everything in April, but the biggest declines were in capital goods, which fell $2.7 billion. The primary culprit here was a $2.3 billion decline in civilian aircraft exports as the impact of Boeing’s 737 MAX problems is likely beginning to creep into the trade data.”
“This report tells us that even before the recent escalation in the U.S.-imposed tariffs, trade was slowing. Yes the trade deficit narrowed, but only because imports are falling more than exports. That is not a sustainable way for trade to lift a nation’s economy. Still, regardless of the reason why, the smaller trade deficit might lead some forecasters to dial back the expected drag from trade on Q2 GDP estimates.”
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