By Steven L. Byers, PhD and Jeff Ferry
The US trade deficit in goods and services for January 2020 fell 6.7 percent from December, to $45.3 billion, as January’s monthly imports decreased more than exports.
On a year-over-year basis, January’s goods and services deficit fell $8.5 billion, or 15.8 percent, from January 2019, continuing the trend of a shrinking trade deficit in the full-year 2019 results. Even better, in January on a year-on-year basis, exports increased (by 1.1 percent) while imports fell (by 2.4 percent).
The January decline in the trade deficit was due to a $2.6 billion (3.8 percent) decrease in the goods deficit, to $67.0 billion, and an increase in the services surplus of $0.6 billion (2.9 percent), to $21.7 billion.
The trade deficit with China worsened in January. The US goods deficit with China was $26.1 billion, up 5.1 percent from December. However, on a year-on-year basis, January’s China deficit is down 24.4 percent from January 2019, demonstrating that tariffs continue to shrink America’s China deficit.
“The US trade deficit continued to shrink in January, continuing the healthy progress we saw in 2019,” commented CPA Chief Economist Jeff Ferry. “A smaller trade deficit will make a positive contribution to GDP, and reinforces the positive impact of today’s job figures which showed a larger-than-expected increase in February jobs of 273,000, including a nice uptick of 15,000 manufacturing jobs. However, the remainder of this year is highly uncertain as the impact of the coronavirus on the economy is difficult to forecast.”
Improved Monthly Goods Trade Deficit with the EU
With regards to other major trading partners, the monthly goods trade deficit with the European Union (EU) fell by 20 percent in January, to $12.2 billion. In comparison to January 2019, the year-to-date goods trade deficit was $551 million larger as exports fell by $398 million and imports increased $153 million. The January trade deficit with Germany fell 13 percent, to $5.1 billion. Year-on-year, the US-Germany trade deficit decreased 3.8 percent.
In 2019, imports shifted away from China due to the US Section 301 tariffs, and production moved to other east Asian countries. However, this abated slightly in January, as the year-on-year trade deficit decreased with India by 6.8 percent, to $2.1 billion. The US deficit with Taiwan fell 10 percent, to $2.2 billion, and with Malaysia the goods deficit increased 14 percent, to $287 million.
Year-on-year, America’s goods deficit with Japan narrowed 4.0 percent, to $5 billion. The trade deficit with South Korea fell 59 percent, to $1.2 billion. Our deficit with Canada climbed 279 percent, to $2.8 billion, and for Mexico it rose 30 percent, to $7.5 billion.
Agriculture Trade Mixed in January
The impact of the “Phase One” trade agreement with Beijing may be delayed somewhat by the worsening coronavirus outbreak in China. Exports of agricultural commodities increased $410 million in January over the revised December figure but are still $487 million lower than a year ago. Within the major agricultural commodities there were winners and losers. Soybean exports increased in January by $314 million and are ahead year-on-year over 2019 exports by $454 million. Exports of wheat were up $7 million from the previous month but fell on a year-on-year basis by $57 million. Corn exports fell $22 million in January and were down $438 million from the same month in 2019. Exports of dairy products were down slightly by $2 million in January compared to December, but up $114 million over the January 2019 figure.
For industrial imports, the picture is mixed, with many important categories trending down from a year ago. Iron & steel mill imports fell by $494 million or 26.6 percent compared to January 2019. Telecommunications equipment imports decreased by $293 million. Civilian aircraft imports rose 8.8 percent, to $767 million, and automobile imports decreased 15.0 percent. to $12.6 billion. Pharmaceutical imports continue to increase at a rapid pace, up 15.0 percent, over January 2019 to $13.1 billion.