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June 27, 2018 4:00 PM, EDT
Trade War Shows Signs of Impact in US Exports, Durables Data
Alabama State Port Authority

Some economists are detecting signs in data that trade tensions are having an impact on American companies.

Figures released June 27 showed that the U.S. trade deficit unexpectedly shrank in May to the narrowest in nine months as gains in exports outpaced imports, a hint that companies were reacting to the possibility of tariffs. A separate report, also from the Commerce Department, showed that orders of durable goods slumped 0.6% last month.

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Rising shipments were propelled by two key sectors at risk of retaliatory measures from trading partners: capital goods and food products. And business-equipment orders placed with U.S. factories cooled after a robust April.

“Exporters may have rushed their goods out the door this spring to beat the possibility of hefty tariffs,” Stephen Stanley, chief economist at Amherst Pierpont Securities in New York, wrote in a research note on the trade figures. On business-equipment orders, he said trade concerns may have some multinational companies “sitting on their hands” temporarily to wait out recent moves by Washington and reciprocal actions.

Both reports suggest U.S. firms are reacting in advance of a more protectionist environment that would make trade much more expensive, according to Barclays economists Michael Gapen and Pooja Sriram, who upgraded their second-quarter tracking estimate for economic growth to a 4.7% annualized pace from 3.5% on the shrinking deficit.

Even so, solid domestic demand is likely to “lead to stronger imports of consumer goods, capital goods and industrial supplies over time,” the Barclays economists wrote in a note.