U.S. Trade Deficit Falls 9% in March to $64.2 Billion; Goods Deficit at $269.8 Billion on Year

The economy may be slowing after the massive import build-up caused by pandemic lockdowns, based on Thursday’s trade figures released by the Bureau of Economic Analysis.. The March trade deficit fell 9.1% to come in at $64.2 billion, with the goods deficit for the year now below that of the same three-month period in 2022. As of March, the year-to-date goods trade deficit was $269.8 billion versus $340 billion a year ago. At this rate, the U.S. looks set to record yet another trillion-dollar goods deficit, but it will be less than last year’s, and maybe less than 2021’s first trillion-dollar gap, which was $1.09 trillion.

For the combined goods and services numbers in March, exports were $256.2 billion, $5.3 billion more than February exports. And March imports were $320.4 billion, $1.1 billion less than February imports.

Year-to-date, the goods and services deficit decreased $77.6 billion, or 27.6%, from the same period in 2022. Exports increased $61.4 billion or 8.7%. Imports decreased $16.2 billion or 1.6%.

See CPA Trade Database for more charts.

Worth noting, the dollar weakened in March. The U.S. Dollar Index, the main measure of the dollar’s strength used by the markets, started the month at 104.48 and ended the month at 102.51.   The CPA/Blue Collar Dollar Institute Currency Misalignment Monitor said the dollar is 12.1% overvalued. A Goldman Sachs report last month agreed, estimating that the dollar was overvalued against the world’s other core currencies by at least 15%. The strong dollar makes America soak up the world’s imports, making it more attractive for American companies (and consumers) to buy imported goods.

“With retail sales down 1% in March, and the labor market slowing, it’s not surprising that the trade deficit is smaller so far this year,” said CPA Chief Economist Jeff Ferry. “But the fundamentals, such as the overvalued dollar and decisions by major carmakers to import autos from China, continue to indicate that over time imports will take a growing share of the US market until we take decisive policy action.”

Surpluses and Deficits

The March figure showed mostly small monthly surpluses, in billions of dollars, with South and Central America ($5.7), Netherlands ($4.0), Belgium ($2.1), Australia ($1.7), Hong Kong ($1.6), United Kingdom ($1.2), and Brazil ($1.1). Deficits were recorded, in billions of dollars, with China ($22.9), European Union ($15.6), Mexico ($11.6), Canada ($7.7), Vietnam ($7.5), Germany ($6.3), Japan ($5.9), Ireland ($5.7), Italy ($4.0), South Korea ($3.6), Taiwan ($3.6), India ($3.1), Malaysia ($2.8), Switzerland ($2.1), France ($0.9), Israel ($0.5), Saudi Arabia ($0.4), and Singapore ($0.2).

• The U.S. three-month goods deficit with China is $60.77 billion, according to Census data. This is the smallest number since 2020, when China began locking down some cities due to the new SARS variant spreading from Wuhan.
• The three-month goods trade deficit with Vietnam is $23.28 billion, which is less than it was in the same period of 2022, but higher than all other three-month periods in previous years.
• The three-month goods deficit with Mexico is the highest ever, at $34.32 billion, beating the previous record of $30.31 billion set in 2022. This suggests some trade diversion from China, with Mexico’s share of the U.S. import market likely to increase.
• The goods deficit with the European Union for Jan-March is $46.34 billion, which is above 2022 levels but below 2021’s record-breaking three-month gap of $50.13 billion.

What We Sell, What We Buy

For March, the number one item by value exported by the U.S. was crude oil at $11.62 billion. The No. 2 item after oil was pharmaceuticals, at $9.11 billion. Those two goods compete for the top value all year, with crude oil exports valued at $29.29 billion and pharmaceuticals at $26.92, suggesting pharmaceutical goods manufacturing is of major importance to the U.S. economy.

As usual, the U.S. imports much more pharmaceuticals than it exports.

Here’s a look at our top five exported and imported goods year-to-date.

Exports:

                                                March           YTD 2023           YTD 2022

Pharmaceutical goods            $9.11b           $26.92b               $22.04b

Industrial machinery               $5.41b           $16.96b               $17.75b

Auto parts                               $5.28b           $15.86b               $14.04b

Passenger cars                      $4.88b           $15.13b                $12.94b

Semiconductors                     $4.80b           $14.68b                 $17.08b

Imports:

                                                 March          YTD 2023           YTD 2022

Pharmaceuticals                      $17.35b        $51.18b               $46.98b

Passenger cars                        $15.61b        $46.13b               $39.31b

Auto parts                                 $11.07b        $34.08b               $31.94b

Cell phones                               $8.9b           $31.56b               $36.36b

Computers                                $7.94b          $22.78b               $28.31b

Worth noting, even though semiconductors are not on the top import list, the U.S. imported $6.08 billion worth of semiconductors in March. We have a semiconductor deficit with the world, most of it Asia. Year-to-date, the U.S. imported $19.40 billion worth of chips.

And while crude oil is our No. 1 export by value, we imported $13.55 billion worth of crude oil in March, meaning the U.S. still had a roughly $2 billion deficit in crude oil for the month. Year-to-date, the U.S. imported $41.45 billion worth of crude, adding to the trade deficit.

All told, the U.S. exported $116.59 billion in goods, most of that total manufactured goods, and imported $226.23 billion in March. Both numbers are greater than February’s numbers. Year-to-date exports of goods totaled $317.17 billion with imports of $643.69 billion, based on BEA data.

Finally, the U.S. often boasts of its advanced technology prowess, the trade gap with the world in advanced tech stands at $46.89 billion for year-to-date ending March 31. The only advanced tech where the U.S. is not experiencing a deficit is in aerospace, at this time. Our biggest deficit nations in this space are China and Taiwan, followed by Mexico.