By David Harrison
The U.S. trade deficit widened in March as the economic shock
related to the global coronavirus pandemic held down both imports
The deficit rose 11.6% to a seasonally adjusted $44.4 billion in
March from $39.8 billion in February, snapping two months of
declines, the Commerce Department said Tuesday. Imports declined
6.2% to $232.2 billion in March, the lowest figure since October
2016. Exports were down 9.6% to $187.7 billion, the lowest since
The March trade numbers are likely to be the beginning of a
sustained fall in global trade, said Brad Setser, a senior fellow
at the Council on Foreign Relations. The coming months will
probably show a continuing decline in U.S. imports and exports, he
"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," Mr. Setser
Separate surveys of purchasing managers found that U.S. services
businesses saw their steepest drop in activity in April since the
The Institute for Supply Management's nonmanufacturing index
fell to 41.8 in April, down from 52.5 in March and the lowest
reading since March 2009. And the private data firm IHS Markit said
its U.S. services index -- a survey-based measure of activity in
industries such as finance, hotels and transportation -- saw its
sharpest one-month decline since the survey began in October 2009,
falling to a seasonally adjusted 26.7 in April from 39.8 the prior
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 around the world, 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
The Tuesday report offered an early glimpse at the effect of
those lockdowns on travel and trade. Travel into the U.S. --
counted as an export in trade statistics -- was down 45.3% in March
from the previous month. Overall services exports fell 15.3% on the
month to $59.6 billion, the lowest since December 2013.
The collapse in oil prices also contributed to slowing trade
volumes in March. Imports of petroleum products were down 21.9%
while exports fell 13.2%.
Exports of cars and car parts were down 17.9%, reflecting both
closed factories in the U.S. and a drop in global demand. Imports
were down 8.9% from the previous month.
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
U.S. economic data released so far all suggest that trade flows
will slow considerably in the months ahead.
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
Karl Glassman, the chief executive officer of Leggett &
Platt, Inc., which makes furniture parts, said Tuesday that the
collapse in global demand had forced the company to temporarily lay
off employees and cut costs.
"So much of the demand that we experience is based on consumer
confidence, and we have a consumer that doesn't know, frankly, what
to think," he said on an earnings call. "It always feels like we're
one day away from bad news."
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.
Over the first quarter of the year, exports to China are down
15.4% from the first quarter of 2019. Imports are down 28.4%.
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
"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
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.
--Gwynn Guilford contributed to this article.
Write to David Harrison at email@example.com
(END) Dow Jones Newswires
May 05, 2020 14:22 ET (18:22 GMT)
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