The U.S. goods and services trade deficit fell 1.3% in May to $85.5 billion thanks in large part to a rise in commodities exports, led by oil, natural gas and soybeans.
May exports were $255.9 billion, $3.0 billion more than April exports and May imports were $341.4 billion, $1.9 billion more than April imports.
Year-to-date, however, the goods and services deficit increased $126.5 billion, or 38.4%, from the same period in 2021. Exports increased $197.1 billion or 19.4% and Imports increased to $323.6 billion, a 24% jump over a year ago, suggesting we are on par for another trillion-dollar goods deficit.
The goods deficit declined again in May, this time coming in at $104.95 billion on a balance of payments basis, which is down from $107.81 billion in April and this year’s record-breaking $126.81 billion registered in March.
Worth noting as we await the June and July figures, the dollar’s 20-year high against the Euro could easily increase imports this summer even during an economic downtown.
“The dollar is hitting some shocking levels, such as $1.02 against the euro and 135 yen,” said CPA chief economist Jeff Ferry. “This is likely to accelerate import penetration, slow down exports, and make our trade deficits even worse. This effect of a rising dollar when our economy is strong, and a rising dollar when the world economy weak, sometimes labeled the `dollar smile,’ is deadly for our economy and the administration should be looking at measures to bring the dollar back to a sensible level.”
Who’s Buying?
An overvalued dollar against the Euro led to an $18.41 billion deficit with the European Union in May, up from $16.59 billion in April. This is the highest monthly trade gap with the EU this year.
Vietnam continues to break records. The U.S. goods deficit with them hit a record-breaking $10.65 billion in May. To put that number into perspective, pre-pandemic, in 2019, the May goods trade deficit with Vietnam was $4.24 billion.
Others…
- The deficit with China decreased $2.8 billion to $32.2 billion in May. Exports increased $0.5 billion to $12.5 billion and imports decreased $2.3 billion to $44.7 billion.
- The deficit with Mexico decreased $1.6 billion to $9.9 billion in May. Exports increased $0.8 billion to $28.7 billion and imports decreased $0.7 billion to $38.6 billion.
- The deficit with Canada increased $0.9 billion to $9.8 billion in May. Exports decreased $1.1 billion to $29.5 billion and imports decreased $0.2 billion to $39.3 billion.
Top Five Exports
The main exported manufactured goods are the same as always. Semiconductors and cars are relatively flat over the last month.
Item May April
Pharmaceuticals $7.69 B $6.66 B
Semiconductors $5.48 B $5.47 B
Passenger cars $4.63 B $4.63 B
Autoparts $4.43 B $4.62 B
Electric apparatus $4.01 B $3.97 B
Top Five Imports
As usual, within the top five items traded, the U.S. imports more than it exports because most of the domestic production stays home for local sales.
Item May April
Pharmaceuticals $15.98 B $15.05 B
Passenger cars $13.31 B $13.59 B
Cell phones $121.15 B $12.01 B
Autoparts $11.66 B $11.13 B
Electric apparatus $7.53 B $6.99 B
As the dollar continues its runaway overvaluation against other major currencies, namely the euro and renminbi, barring a severe recession, the U.S. is on par to match or slightly beat last year’s good deficit of $1.09 trillion.
