US: Trump’s trade triumph?
The US trade deficit narrowed more than expected in November 2019 to US$43.1bn, the smallest deficit since October 2016, as imports fell 1% and exports rose 0.7%. We already knew that the goods deficit had shrunk in November, but we also now know there was an increase in the surplus on services.
In terms of the goods balance the slowdown in imports likely reflects the fact that inventories have been built up over recent quarters on the back of escalating trade tensions. Given the early October announcement that there was a phase one trade deal in the offing, we may be starting to see evidence of firms pulling back on some import demand, although we acknowledge the long lag between orders and the imports arriving.
Given the de-escalation of tensions we may well see less volatility in imports in coming months with scope for imports to increase once again given decent US consumer demand fundamentals.
The deficit with China narrows, but is widening with other countries.