By Harriet Torry 

WASHINGTON -- American firms bought fewer Chinese-made consumer goods in October in the wake of new U.S. import tariffs, and the overall trade deficit narrowed.

The foreign-trade gap in October goods and services contracted 7.6% from the prior month to a seasonally adjusted $47.20 billion, the Commerce Department said Thursday.

Imports sank 1.7% from September, led by a 4.4% drop in imports of consumer goods. Cellphone imports dropped 4.2%, while imports of toys fell 10.1% and apparel decreased 9.2%. Imports of goods from China were $1.7 billion lower in October than September, a 4.8% drop.

Barclays economist Pooja Sriram said the drop in consumer-related imports was due in part to increased purchases in prior months to get ahead of anticipated tariff increases.

"There's so much uncertainty around U.S.-China trade talks, it's hard to see how imports will behave going forward," she said.

The U.S. on Sept. 1 imposed new tariffs on about $111 billion in products, including for the first time some consumer goods like apparel, tools, electronics and other consumer items from China.

In total, the U.S. now has tariffs on about $360 billion of Chinese imports and is scheduled to add 15% tariffs on another $165 billion or so of imports on Dec. 15, unless the two sides strike a deal.

Overall trade volumes have fallen due to a "broad-based slowdown in external demand," Ms. Sriram said. Economic weakness overseas is hitting U.S. exports, while imports related to business investment have declined in recent months.

Imports are a drag on U.S. gross domestic product, and a narrower trade deficit is generally a positive sign for economic growth. However, lower imports of consumer goods could point to waning consumer demand, a negative signal since household spending is core to U.S. growth.

"Neither lower imports nor lower exports are signs of economic vitality, either here or abroad," said Joshua Shapiro, chief economist at Maria Fiorini Ramirez Inc., said in a note to clients.

As negotiations between the world's two-largest economies continue, the Chinese have resumed making large-scale agricultural purchases, particularly of American soybeans, after nearly halting such purchases last year as trade tensions emerged.

U.S. exports of food, feed and beverages to China climbed to $1.2 billion last month, the second best month for such exports since the U.S.-China tariff fight ignited in May 2018.

Despite a recovery in recent months, U.S. agricultural exports to China remain paltry compared with two or three years ago. In October 2017, the U.S. exported more than $3 billion of farm goods to China, and in 2016 the figure was nearly $4 billion that month.

The mild recovery in farm exports to China wasn't enough to offset a broad decline in goods exports. Overall goods exports slipped to their lowest since January of 2018.

Total exports fell 0.2% to $207.1 billion from September's $207.6 billion. Exports of vehicles, civilian aircraft engines and consumer goods all declined in October, although those categories were also hit by the 40-day strike at General Motors Co. and the continued grounding of the 737 MAX airliner at Boeing Co. A decline in automotive imports, as the United Auto Workers union strike was under way, also contributed to the overall drop in imports in October.

Trade has been a drag on growth for the past two quarters, according to the Commerce Department's most recent GDP reading. Net exports subtracted 0.11 percentage point from the third quarter's 2.1% GDP growth rate, after a 0.68 percentage point drag in the second quarter. Through the first 10 months of 2019, the U.S. trade deficit grew 1.3%.

Trade with China has been volatile in recent months, as companies sought to get products into the U.S. before anticipated increases in tariffs. Imports of consumer goods surged in August and then pulled back in September and October.

"It would not be surprising to see another spike in November and/or December, as shippers try to beat the pending Dec. 15 deadline for a new round of tariffs," said Stephen Stanley, chief economist at Amherst Pierpont, in a note to clients.

Many executives say they are hoping business would pick up if a "phase one" trade deal with Beijing to ease tariffs on Chinese imports is agreed upon in the coming months, along with the approval of the U.S.-Mexico-Canada Agreement, or USMCA.

Frank Sonzala, chief executive of CIMC Intermodal Equipment, a South Gate, Calif.-based chassis trailer manufacturer, said production has been held back by an overall slowdown in the trucking and intermodal industry in the third quarter, mostly caused by a jump in tariffs on certain Chinese products to 25%.

That "made the CFOs, the VPs of finance, and board of directors at many of the companies in the intermodal and trucking industry say we can't afford to pay for five [chassis] and only get four."

Other businesses are profiting from the new trade landscape. For family-owned hand dryer maker Excel Dryer Inc., tariffs on imports from China "are putting us into a competitive advantage," sales and marketing executive William Gagnon said, since the majority of Excel products' parts are made in the U.S. The company is currently expanding its facility in East Longmeadow, Mass., with new office and warehouse space.

Write to Harriet Torry at harriet.torry@wsj.com

(END) Dow Jones Newswires

December 05, 2019 13:29 ET (18:29 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.