US President Donald Trump (left) and Chinese President Xi Jinping (right). Picture: AFP/FRED DUFOUR
US President Donald Trump (left) and Chinese President Xi Jinping (right). Picture: AFP/FRED DUFOUR

Washington — The US trade gap narrowed in November 2019 to the smallest in three years as exports advanced amid a thaw in the trade war with China, while imports fell to the lowest since 2017.

The overall US deficit in goods and services shrank to $43.1bn in November from $46.9bn the prior month, according to data released on Tuesday by the US commerce department. The median estimate of economists surveyed by Bloomberg called for a shortfall of $43.6bn.

The figures suggest the gap may shrink on an annual basis for the first time since 2013, largely reflecting a steep drop in imports from China following US President Donald Trump’s tariffs on goods from that country. While a narrower deficit would let Trump claim his trade policies are bearing fruit, the battle has cast a pall over US manufacturing and caused business investment to slide as companies wrestle with uncertainty.

The report also indicates that trade is on track to contribute to fourth-quarter economic growth after having weighed on GDP  for the previous two periods.

The US and China announced a phase-one accord in mid-December following agreement in October on the broad contours, at least temporarily calming fears of an escalating trade war. The deal will involve reduced tariffs in exchange for more Chinese purchases of American farm goods, such as soybeans and pork, as well as commitments on intellectual property, forced technology transfer and currency markets.

The merchandise trade deficit with China shrank to a seasonally adjusted $25.6bn, the smallest since 2013, according to data compiled by Bloomberg. Exports to China rose by $1.4bn, the most since February 2019, while imports declined for a sixth straight month, reflecting the toll of more than a year of tariffs.

For the first 11 months of 2019, the overall gap in goods and services was $563bn, compared with $566.9bn in 2018; for merchandise, the deficit narrowed to $791.2bn from $806.4bn.

Deal-signing

Trump has said he will sign the trade deal in Washington on January 15. A Chinese delegation, led by its top trade negotiator, vice-premier Liu He, will travel to the US capital to sign it, according to people familiar with the matter, Bloomberg reported this week.

The US typically runs a services surplus and merchandise deficit, a shortfall that Trump has assailed as unfair. Even as a shrinking deficit provides a possible talking point for Trump, overall US trade with China has fallen sharply in 2019, dropping China to third place among trading partners, behind Mexico and Canada.

In the first 11 months of 2019, merchandise imports from China were down 15% and exports to the country dropped 11.4%. The US goods deficit with China narrowed to a seasonally adjusted $319.8bn from the same 11 months of 2018, the report showed.

Overall exports of goods and services in November rose 0.7% to $208.6bn, including gains in consumer goods, capital goods and soybeans. Imports fell 1% to $251.7bn, with declines in civilian aircraft, consumer goods and petroleum products.

In nominal terms, the petroleum surplus edged up to a record $832m, further boosting America’s new status as a net exporter. Price-adjusted imports of petroleum were $27.2bn, the lowest in data going back to 1994.

Bloomberg