U.S. Trade Deficit Shrinks Thanks to Falling Imports
(WASHINGTON) - The trade deficit in the United States significantly decreased in October, driven by a notable drop in imports, the biggest decline since late 2022, which could help boost economic growth in the last quarter of the year. According to the Bureau of Economic Analysis from the Department of Commerce, the trade gap shrank by 11.9%, decreasing from $83.8 billion in September to $73.8 billion.
Experts consulted by Reuters had anticipated that the trade deficit would narrow to $75 billion, compared to $84.4 billion in September. Imports fell by 4.0%, marking the largest decrease since November 2022, totaling $339.6 billion. In particular, imports of goods dropped by 5.5%, down to $269.3 billion. In light of warnings from President-elect Donald Trump about potential increases in tariffs on foreign products, businesses might rush to make their imports, which could reverse October's decline and ensure that trade continues to negatively impact Gross Domestic Product (GDP). Trump has stated that on his first day in office he would impose a 25% tariff on products from Mexico and Canada, as well as a 10% tariff on goods from China. Imports of capital goods decreased by $7.5 billion, affected by declines in imports of computers and semiconductors. Likewise, imports of industrial supplies and materials, including oil, fell by $3.3 billion. Oil purchases were at $17.2 billion, the lowest since June 2021. There was also a decrease in imports of consumer goods, particularly pharmaceuticals, as well as vehicles and parts. However, imports of services increased by $1.4 billion, reaching a record $70.2 billion, thanks to travel activities, intellectual property fees, transportation, insurance, and other business services. On the other hand, exports decreased by 1.6%, down to $265.7 billion, with a 3% drop in goods, reflecting a decline of $3.9 billion in capital goods.
Shipments of vehicles, parts, and engines also showed a decline, as did industrial supplies and materials and consumer goods. However, exports of services grew by $1 billion, reaching a new high of $95.1 billion, boosted by travel, business services, maintenance, transportation, and the use of intellectual property. Increases were also reported in exports of telecommunications, information technology, and data services. The goods trade deficit narrowed by 9.5%, settling at $98.7 billion. When adjusted for inflation, it decreased by 7.3%, down to $92.4 billion. Trade subtracted 0.57 percentage points from GDP in the July to September quarter, maintaining its role as a drag on economic growth for three consecutive quarters. Despite this, the economy managed to grow at an annualized rate of 2.8% in the July to September period.
The decrease in the trade deficit could be interpreted as a sign of adjustment in the U.S. economy, which may optimize the economic environment for Mexico and other trading partners. However, it’s important to consider that uncertainty in trade policies, particularly in an electoral context, can lead to market volatility. Staying informed and diversifying income sources could be key to mitigating risks during times of economic change.
