By Steven L. Byers, PhD and Jeff Ferry
US trade with China was drastically disrupted in February in the wake of the coronavirus pandemic.
China’s ability to export goods declined and their demand for imported goods fell as a large segment of their population was forced to self-quarantine. As a result, the US goods trade deficit with China fell to $16.0 billion, down $11 billion from the January figure. The February figure is America’s lowest bilateral deficit with China since February 2006. It’s the first time our monthly deficit with China has fallen below $20 billion since 2013. Compared with February 2019, US exports to China fell 19 percent, to $6.8 billion. However, US imports from China fell by 31 percent, to $22.8 billion.
On a global basis, the US trade deficit in goods and services for February 2020 fell 12 percent, to $39.9 billion (seasonally adjusted), as monthly imports decreased more than exports.
The February decline was due to a $5.9 billion decrease in the goods deficit, to $61.2 billion, and a small drop in the services surplus of $0.4 billion, to $21.3 billion. Year-over-year, the goods and services deficit decreased $19.7 billion, or 18.7 percent. Exports increased $1.1 billion, or 0.3 percent. Imports decreased $18.6 billion, or 3.6 percent.
The US goods trade deficit with Mexico was $9.7 billion, 30 percent larger than the year-earlier figure of $7.4 billion. With regard to other major trading partners, the monthly goods trade deficit with the European Union (EU) was $10.0 billion, 8.7 percent worse than the year-earlier figure of $9.2 billion.
Exports of agricultural commodities in February were $11.3 billion, down 1.1 percent from the January level. Within the major agricultural commodities there were winners and losers. Soybean exports came in at $940 million, down 35 percent from the January level. Exports of wheat were up 14 percent to $580 million. Corn exports increased 47 percent to $826 million. Dairy product exports fell 2.4 percent to $443 million.
Soybean exports to China dropped off dramatically to $175 billion, down 77.5 percent from the January level. However in January 2020, soybean exports were high at $778 billion, up 64.8 percent on January 2019, suggesting that when the coronavirus crisis ends, China may meet its targets in the Phase One deal of buying an additional $80 billion of US agricultural products over the next two years.
Interestingly, in the Phase One agreement of January, a clause allows for a natural disaster to change the terms of the deal. It instructs the two parties to consult with each other.
For other major categories of imports, the year-on-year picture is mixed. Iron & steel mill imports fell by $174 million. Telecommunications equipment imports decreased by $640 million. Civilian aircraft imports rose 44 percent to $1.1 billion, and automobile imports increased 11 percent to $13.9 billion. Pharmaceutical imports continue to increase, though at a lower rate than previously seen, up 2.4 percent to $13.4 billion. However, pharmaceutical supplies from China decreased 35 percent from January to $103 million in February. The US is dependent on China for critical drugs and the decline in pharma imports from China in a month when the coronavirus pandemic was beginning to surge in the United States is a graphic illustration of the shortcomings of dependence on foreign pharmaceuticals.
Earliest the USMCA Can Go into Effect is July 1
Officials in the U.S., Mexico, and Canada failed to meet a deadline on Tuesday that was necessary for the NAFTA replacement to take effect by June 1. The earliest the USMCA trade agreement can now go into effect would be July 1, provided all three parties agree.