By David Harrison 

Economists surveyed by The Wall Street Journal expect the U.S. government to report Tuesday that the country's trade deficit widened in March as the global coronavirus pandemic upended supply chains and slashed consumer spending.

The trade gap expanded by 11.2% in March to $44.4 billion, as exports fell more than imports, the economists estimated.

"We'll see the beginning of what's going to be a sustained fall in trade, " said Brad Setser, a senior fellow at the Council on Foreign Relations.

Several factors have depressed global trade in recent months. First, the emergence of the new coronavirus in China caused factories there to shut down, disrupting supply chains world-wide. Then the virus spread world-wide, prompting many businesses to close operations, which caused job losses, and many governments to issue stay-at-home orders, which held down consumer spending. The lockdowns have likely produced a global recession, further reducing demand.

The International Monetary Fund predicted last month that global trade would fall 11% this year. The World Trade Organization projects an even steeper decline of between 13% and 32%, affecting all global regions but particularly Asia and North America.

A decline of such magnitude would be steeper than during the global financial crisis of 2008-09, the WTO said. After that crisis, trade never returned to its previous level, the WTO said. The same could happen now if the coronavirus shock ends up being prolonged.

U.S. economic data released so far all suggest that trade flows will slow considerably in the months ahead.

The Commerce Department's advance estimates of U.S. goods trade for March, released April 28, showed a 6.7% decline in exports and 2.4% decline in imports. That expanded the U.S. trade deficit in goods by 7.2% to $64.2 billion. The department's Tuesday release will provide a fuller picture by including more details as well as data for trade in services.

The department reported Thursday that consumer spending fell 7.5% in March, the sharpest one-month drop on record. On Friday, a gauge of manufacturing showed factory activity contracted in April at the sharpest pace since the last recession.

Overall economic output fell at a seasonally adjusted annual rate of 4.8% in the first quarter, the department said last week.

The coming months are likely to show a continuing decline in U.S. imports and exports, Mr. Setser said. "It's safe to project that April will see a much bigger fall and there's not likely to be a significant recovery in May," he said.

If U.S. exports continue to decline faster than imports, it would widen the trade deficit, which had been shrinking over the past year amid a slowing global economy and the Trump administration's tariffs on China.

The two countries struck a "Phase One" trade agreement in January, which committed China to increase its purchase of U.S. goods by $77 billion in 2020 and by $123 billion in 2021.

At the time, analysts said it would be difficult for Chinese companies to boost imports to that extent. Now, the economic fallout of the pandemic makes it even less likely the Chinese private sector will meet those targets.

Meeting the terms of the deal could now rely on the state's willingness to step in and make the purchases instead of the private sector, said Mary Lovely, an economist at Syracuse University.

"There are going to be a lot of businesses in China that are not going to survive this," she said, referring to the lockdowns associated with the coronavirus. "They're definitely going to have trouble."

Global trade will rebound once the pandemic is contained, Mr. Setser said, but it might not return to the same level as before. The shortages of medical supplies that the U.S. and other countries experienced due to the supply-chain shocks could prompt efforts to be more self-sufficient, he said. That could reduce some trade flows in the long run, he said.

Write to David Harrison at david.harrison@wsj.com

(END) Dow Jones Newswires

May 05, 2020 05:44 ET (09:44 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.