US trade deficit widens due to pandemic

WASHINGTON: The US trade deficit increased by the most in more than a year in March as a record drop in exports offset a shrinking import bill, suggesting the novel coronavirus outbreak was upending the global flow of goods and services.

Other data yesterday showed the tough measures to slow the spread of Covid-19 pushed the nation’s vast services sector into contraction in April for the first time in nearly 10 years.

The reports were the latest indication that the economy was sinking deeper into recession and that a sharp rebound was unlikely even as parts of the US started to reopen.

The Commerce Department said the trade deficit jumped 11.6 per cent, the largest rise since December 2018, to $44.4 billion. Economists had forecast the trade gap increasing to $44bn in March.

In the US gross domestic product declined at a 4.8pc annualised rate in the first quarter, the steepest pace of contraction in output since the fourth quarter of 2008. Economists believe the economy entered recession in the second half of March when the social distancing measures took effect.

Though some parts of the country have started reopening, economists did not see the economy quickly returning to pre-pandemic levels, which they said would take years. Reopening the economy also involves the risk of a second wave of infections and further lockdowns.

A survey from the Institute for Supply Management (ISM) yesterday showed its non-manufacturing activity index fell to a reading of 41.8 last month, the first contraction since December 2009. It was also the lowest level since March 2009 and followed a reading of 52.5 in March.

In March, the politically sensitive goods trade deficit with China decreased $4.2bn to $11.8bn, a 16-year low. Imports from China fell, while exports to that country rose.

When adjusted for inflation, the overall goods trade deficit increased $6.5bn to $75.3bn in March. Despite March’s increase, the so-called real goods trade deficit narrowed sharply in the first quarter.

In March, exports dropped a record 9.6pc to $187.7bn, the lowest since November 2016. Goods exports tumbled 6.7pc, the most since December 2008, to $128.1bn. There were decreases in exports of capital goods, which fell $2bn to $42.6bn, the lowest since November 2016.

Exports of motor vehicles and parts dropped $2.5bn to $11.3bn in March, the weakest since November 2011. Shipments of consumer goods hit a seven-year low in March. Exports of services tumbled $10.8bn to $59.6bn, the lowest level since November 2013.

Imports dropped 6.2pc to $232.2bn, the lowest since November 2016. The percentage decline in imports was the biggest since January 2009. Goods imports fell 2.3pc to $193.7bn in March, the lowest since August 2017.

The import bill has been shrinking as the US waged a trade war with China. A sharp reduction in crude oil imports has also been a factor, with the United States becoming an oil exporter last year. The country posted a record $2.1bn petroleum surplus in March.

Tensions have flared up between Washington and Beijing over the origins of the coronavirus, raising fears of an escalation in the trade war between the two economic giants.

In March, imports of vehicles, parts and engines dropped $2.7bn to $27.8bn, the lowest since February 2015. Consumer goods imports decreased $4bn to $47.4bn, the lowest since April 2016. There was a sharp decline in cellphone imports.

The petroleum import bill in March was the smallest since May 2016. Imports of services were down $10.7bn to $38.5bn in March, the least since August 2013.




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