Data released today showed the trade deficit widened for the third month in-a-row. Analysts at Wells Fargo point out goods exports increased, but not enough to retrace the steep decline in April. They noted overall goods export have yet to return to pre-trade war levels.
Key Quotes:
“As this expansion enters into record duration, incoming data in recent weeks present a mixed picture on how long we can expect the good times to last. In many ways the themes driving recent economic developments were evident in today’s trade report for May.”
“Worries about the deterioration in global growth and associated concerns about business spending were evident in the merely tepid growth in capital goods imports.”
“Tariffs have reduced imports from China on trend and reversed (at least temporarily) a decades-long expansion of the U.S.-China trade deficit. Yet, the trade war has not reduced total imports nor has it made a dent in the overall trade deficit. In fact, since the start of 2017, the trade deficit has widened 27.7%. Domestic importers are re-routing foreign supply chains. Although it is early on, the key benefactors appear to be Vietnam, Mexico and the Eurozone.”
“Trade added 0.9 percentage points to the headline growth rate in the first quarter, yet the widening in the trade deficit that we have seen thus far in Q2 suggests that will likely reverse in the second quarter. Our latest forecast has net exports pulling growth lower by 0.4 percentage points.”
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