The US trade deficit narrowed sharply as exports reached a record in April, according to the latest government figures that augured well for the American economy. The trade gap dropped by 6.2 percent down from a revised March deficit of $62.4 billion to $58.5 billion, beating the anticipations of even the most optimistic Wall Street economists, reported the US Commerce Department. A weak dollar helped to push exports to a record level and Americans sharply cut spending on imports in April. Wall Street analysts had expected a deficit to remain somewhere between $60 billion and $67 billion. However, the gap with China rose by 2.2 billion dollars, mounting further pressure on the US administration over policies pertaining to Beijing.
The enhancement in the deficit was more or less completely due to a $3.6 billion fall in imports, most likely because people were increasingly scared off by high-energy prices, thereby restraining oil imports. The US economy has been more identified in recent years by strong domestic demand, which has attracted imports much faster than US firms have been able to export. In addition, waning dollar, however, has given a boost to exports, which in April hit a record $129.5 billion. The weakening dollar and growing economies in Europe and Asia are energizing demand for US-made products and the trade gap is narrowing from a record $67.6 billion in August. The increase in exports may also help economic growth speed up after the slowest quarter in more than four years.
The Commerce Department reported that exports shot up by 0.2 percent to a record $129.5 billion, led by aircraft sales, at the same time imports dropped by 1.9 percent to $188 billion. In fact imports were partially depressed by a sharp drop in pharmaceuticals and in gasoline imports. Imports of automobiles, auto parts and engines declined by $1 billion. Despite rising energy prices, oil imports averaged around 10.2 million barrels a day, down from 10.5 million in March. In any scenario, the US trade deficit is still very enormous. For January through April, the trade gap was a cumulative $235.3 billion. However, it is growing less rapidly, even after inflation is taken into consideration. In actual terms, the deficit for the first four months of the year fell by 3 percent compared with the period last year.
Even now, immensely imbalanced trade remains a grave problem for the US economy, as the deficit with China demonstrated. The trade gap with China stood at $19.4 billion in April, marking the largest deficit with any single country. Last April, the trade gap with China was recorded at $17.1 billion. Economists and analysts have said that the growing deficit with China accentuate just how difficult it will be for the US to level out its trade relationship with the rest of the world.
The shine was taken off the encouraging data, however, by a 12.3 percent increase in the deficit with China, highest since January. The sharp increase will definitely provide a strong tool to keep the government under pressure for protectionists in Congress who criticize that Beijing is using unreasonable practices, including keeping its currency artificially low, to strengthen its exports. Imports from China increased by 6.6 percent in April, while the value of goods flowing the other way dropped by 11.5 percent.
Regardless of April’s development, the trade gap remains a damaging 5.1 percent of US gross domestic product, burdening the economy with massive foreign debt and slowing growth. The US has already borrowed $6 trillion to finance the deficit, and the debt service comes to almost $300 billion a year. However, for some optimistic analysts the figures add to the probability of a strong rebound for the economy in the second quarter after a feeble performance in the first quarter.
