Trump Said He Would Reduce US Trade Deficit, Now It's Shrinking

Canada Posted Largest Trade Deficit on Record in March

With exports climbing and imports falling, the Commerce Department released a report on Thursday showing a significantly narrower USA trade deficit in the month of March.

Exports of aircraft and other transportation equipment and parts rose 24.3 per cent in March to $2.3 billion, while farm, fishing and intermediate food products increased 14.7 per cent to $2.8 billion. Economists predicted the March figure would narrow to C$2.25 billion.

America's overall trade deficit fell to a six-month low of $49 billion from $57.7 billion the month before, which was lower than forecasts of $50 billion.

Trump announced new tariffs in March of up to 25 per cent on steel imports and 10 per cent on aluminum imports, and he later granted temporary exemptions to close trade partners, such as Canada, Mexico, Argentina, Brazil and the EU.

More broadly, the US trade gap has widened this year, increasing 18.5% in the first three months of 2018 compared with the same period a year earlier.

The president views trade deficits as a sign of economic weakness that can be brought down by more aggressive trade policies.

Exports also showed broad strength, with nine of 11 sectors rising.




The Bank of Canada, which has long fretted about the sluggish performance of Canadian exporters, says the sector could be hit by uncertainty over the future of the North American Free Trade Agreement. The economy grew at a 2.9 percent rate in the fourth quarter. Real goods exports were the highest on record.

Imports from China (+26.6 percent) led the increase, mainly on higher imports of computers and peripheral equipment, and of communications and audio and video equipment. The US had a US$0.3 billion surplus with Canada in March. Canada sent 73.4 percent of all goods exports to the United States in March.

The import side showed encouraging consumer demand, with passenger vehicles and light trucks up 13 per cent month over month, and consumer products up almost 8 per cent. Economists said the strength reflects Canada's continued strong labour market, as well as the acceleration in wage growth in recent months.

On a volume basis, which excludes the impact of price and currency changes, imports rose 5.3 per cent while exports were up 3 per cent.

And, wheat exports rebounded in the month, up 52 percent, following a sharp decline in February, which coincided with rail transportation disruptions in Western Canada.

March's drop in core capital goods orders and shipments suggest business spending on equipment is slowing.

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