U.S. Trade Gap Widened in April Amid Coronavirus Disruptions -- 3rd Update
June 04 2020 - 1:43PM
Dow Jones News
By Harriet Torry
WASHINGTON -- U.S. exports and imports both posted their largest
monthly decreases on record amid coronavirus-related shutdowns
around the world.
Imports fell 13.7% in April from March, and exports dropped
20.5%, the largest declines since record-keeping began in 1992, the
Commerce Department reported Thursday. The trade deficit expanded
16.7% to a seasonally adjusted $49.41 billion.
"Beyond the fact that we're seeing a significant widening of the
trade deficit, what really strikes me is the pace at which trade
flows are declining," with imports and exports down about a quarter
since the coronavirus outbreak, said Gregory Daco, chief U.S.
economist at Oxford Economics.
Exports of aircraft and cars have dropped as manufacturers such
as Boeing Co. were hit by the world-wide disruption of travel and
auto makers including Ford Motor Co. closed factories to prevent
the spread of the virus.
"We're reopening fast enough that import demand will pick up
faster than export demand," said Joel Naroff, president of Naroff
Economic Advisors. "We'll have more total activity as we go forward
but the trade deficit is likely to widen."
Global trade flows may start to pick up again as some factories
reopen and the easing of social-distancing measures revives
consumer demand.
"Much of the disruption may have already occurred," Angeliki
Frangou, chief executive of container ship operator Navios Maritime
Containers LP, said on an earnings call last month. "As countries
emerge from quarantine and return to work, we expect volumes to
pick up, particularly in the second half of 2020."
Exports of goods in April were the lowest since late 2009, when
the nation was recovering from a deep recession, Thursday's report
showed Imports of goods were the lowest since late 2010.
A similar trend was seen in Canada, where the goods trade
deficit widened in April as exports plunged to their lowest level
in over a decade. Statistics Canada attributed the dramatic drops
in exports and imports to factory shutdowns, weaker energy prices
and widespread economic restrictions as authorities moved to
contain the spread of the new coronavirus.
While the U.S. usually runs a deficit in goods, it runs a
surplus in services. That surplus, in services such as medical
care, travel, higher education and royalties, decreased by $1.3
billion in April to $22.4 billion, its lowest since December
2016.
In the first quarter, a narrowing trade deficit helped limit a
sharp contraction in the U.S. economy. As a whole, the economy
still shrank at a 5% annual rate, the steepest drop since the last
recession. Trade is expected to subtract from gross domestic
product this quarter should the deficit continue to widen.
The U.S. deficit in goods with China widened to $25.96 billion
from $16.99 billion the prior month. Year to date, the deficit with
China amounts to $87.60 billion, compared with $123.68 billion in
the same period of 2019.
Chinese state-controlled companies have canceled some shipments
from U.S. farm exporters, according to maritime officials, as
tensions between Washington and Beijing rise over China's handling
of pro-democracy protests in Hong Kong and the coronavirus
pandemic. The cancellations involve orders made following the
phase-one trade pact between the two countries signed in January,
in which China committed to increasing farm imports from the
U.S.
Lockdowns associated with the pandemic, which originated in
China late last year, have sapped global commerce and growth,
disrupted supply chains and closed factories and stores.
Detroit's car companies agreed in March to temporarily shut down
factories in the U.S., Mexico and Canada to limit the spread of the
new coronavirus. The companies started reopening the factories in
May.
Boeing Co., the country's largest exporter, said in late March
that it would suspend airliner production in the Seattle area, and
General Electric Co. said it would lay off workers making jet
engines for customers including the aerospace giant.
The International Monetary Fund said in April that it expected
the U.S. economy would shrink 5.9% this year. It predicted the
global economy would contract 3% in 2020. China's growth would slow
to 1.2% this year, the IMF projected, from 6.1% last year.
Global trade, already experiencing its weakest activity since
the 2008-09 financial crisis because of the two-year U.S.-China
trade conflict, is likely to contract by 11% in 2020, the IMF said,
a collapse that would make it difficult for countries to revive
their economies by increasing exports.
--Paul Vieira contributed to this article.
Write to Harriet Torry at harriet.torry@wsj.com
(END) Dow Jones Newswires
June 04, 2020 13:28 ET (17:28 GMT)
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