US trade deficit falls in 2019 for the first time in six years

Container ships docked at the Port of Oakland, California. US goods imports tumbled 1.7 percent last year, with exports decreasing 1.3 percent. (Getty Images/AFP)
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Updated 06 February 2020

US trade deficit falls in 2019 for the first time in six years

  • White House’s trade war with China curbs import bill, helping economy to continue to grow moderately

WASHINGTON: The US trade deficit dropped for the first time in six years in 2019 as the White House’s trade war with China curbed the import bill, helping the economy to continue growing moderately in the fourth quarter despite a slowdown in consumer spending.

The Commerce Department said that on Wednesday the trade deficit fell 1.7 percent to $616.8 billion last year, the first drop since 2013. Goods imports tumbled 1.7 percent last year, with exports decreasing 1.3 percent, showing that the Trump administration’s “America First” agenda decreased the flow of goods.

Goods imports, however, rebounded sharply in December, boosting the trade deficit 11.9 percent to $48.9 billion that month. Data for November was revised to show the gap tightening to $43.7 billion instead of $43.1 billion as previously reported. Economists polled by Reuters had forecast the trade gap would widen to $48.2 billion in December.

President Donald Trump, who has dubbed himself “the tariff man,” pledged on both the campaign trail and as president to reduce the deficit by shutting out more unfairly traded imports and renegotiating free trade agreements.

At the height of the US-China trade war last year, Washington slapped tariffs on billions worth of Chinese goods, including consumer products, leading to a decline in imports.

Tensions in the 19-month US-China trade war have eased, with Washington and Beijing signing a Phase 1 trade deal last month. The deal, however, left in place US tariffs on $360 billion of Chinese imports, about two-thirds of the total.

The White House has also sparred with other trading partners, including the European Union, Brazil and Argentina, accusing them of devaluing their currencies at the expense of US manufacturers.

The politically sensitive goods trade deficit with China fell 6 percent to $24.8 billion in December, with imports shrinking 7.7 percent and exports falling 12.2 percent. It tumbled 17.6 percent to $345.6 billion in 2019. But the goods trade deficit with Mexico jumped to a record high of $101.8 billion last year. The deficit with the EU also reached an all-time high of $177.9 billion.

When adjusted for inflation, the goods trade deficit increased $4.3 billion to $80.5 billion in December.

Trade added almost 1.5 percentage points to GDP growth in the fourth quarter, exceeding the 1.20 percentage points contribution from consumer spending, which accounts for more than two-thirds of US economic activity.

The economy grew at a 2.1 percent annualized rate in the fourth quarter, matching the pace notched in the July-September period. It expanded 2.3 percent in 2019, which was the slowest in three years, after growing 2.9 percent in 2018.

In December, goods imports surged 3.2 percent to a seven-month high of $207.5 billion, after declining for three straight months. Goods imports were boosted by a $1.7 billion increase in crude oil imports, which contributed to a $4.0 billion jump in imports of industrial supplies and materials. There was also a $1.2 billion increase in imports of other goods.

Economists believe a 15 percent tariff on $110 billion worth of Chinese goods that came into effect on Sept. 1 had weighed on imports in the prior months. 

They also say anticipation that the Phase 1 trade agreement would roll back the tariffs could have encouraged companies to hold off on imports in late 2019.

Goods exports rose 0.9 percent to $137.7 billion in December. They were lifted by a $1.5 billion jump in shipments of crude oil as well as a $1.0 billion increase in exports of other goods. But motor vehicle and parts exports fell $1.0 billion to $12.4 billion, the lowest since November 2016.

At $17.1 billion, petroleum exports in December were the highest on record.

Saudi Arabia calls ‘urgent’ meeting of oil producers

Updated 02 April 2020

Saudi Arabia calls ‘urgent’ meeting of oil producers

  • Crude prices jump after move, which Kingdom says is part of efforts ‘to support global economy in these exceptional circumstances’

DUBAI: Saudi Arabia has called an urgent meeting of the Organization of Oil Exporting Countries and other oil exporters, to discuss restoring the “desired balance” in global energy markets.

The move — which prompted a big jump in the price of oil on global markets — is part of the Kingdom’s “constant efforts to support the global economy in these exceptional circumstances, and in appreciation of the request of the President of the USA, Donald Trump, and the request of friends in the USA,” according to a statement published by the official Saudi news agency.

Global oil prices reacted immediately. Brent crude, the Middle East benchmark, increased by 20 percent, taking it back above $30 a barrel.

The price of crude has been under pressure as a result of collapsing demand due to the coronavirus crisis, and Saudi Arabia’s determination to win market share from American and Russian producers.

During an OPEC meeting in Vienna last month, the Kingdom offered to implement further cuts in oil production but Russia refused to participate.

“Saudi Arabia would like to underscore its efforts during the past period to restore balance in the oil market, as it drew support for that from 22 counties of the OPEC+, but it was not possible to reach an agreement or get consensus,” according to the official Saudi statement.

Oil industry expert Daniel Yergin said: “This represents a recognition of how much the world has changed for oil in a single month as demand falls away so dramatically, and the impact of Donald Trump becoming personally engaged.”

The Saudi call for talks came after a hectic round of communications between the US, Russia and the Kingdom.

In a message posted on Twitter after the Saudi announcement, Trump wrote: “I just spoke to my friend Mohammed bin Salman, crown prince of Saudi Arabia, who spoke with President Putin and I expect and hope that they will be cutting back approximately 10m barrels, and maybe substantially more, which will be great for the oil and gas industry.”

However, officials in Riyadh downplayed any suggestion of a commitment to specific reductions in the levels of oil output. There is no indication yet of when the “urgent” meeting of OPEC and others might happen, nor what will be on the agenda, they said.

President Vladimir Putin denied that he had spoken to the crown prince about the price of oil. Novosti, the official Russian news agency, said there was no such conversation, but added that the president had discussed falling oil prices with other OPEC members and with the US.

“The Americans are worried because of their profitability for shale oil production,” said Putin. “This is also a difficult test for the American economy.”

This week, Saudi Arabia produced more oil in a single day than at any time in its history, with 12 million barrels flowing from pumps at Saudi Aramco, the world’s biggest oil company.