July 6, 2018 12:00 AM, EDT

Trade Deficit Narrows to Smallest Since 2016 on Soybean Exports

SeongJoon Cho/Bloomberg News

The U.S. trade deficit narrowed in May to its smallest since October 2016 on a jump in exports of soybeans and aircraft amid the threat of retaliatory tariffs.

The gap decreased 6.6% to $43.1 billion, from a revised $46.1 billion in the prior month, Commerce Department data showed July 6. Exports of goods and services climbed to a record high, outpacing a pickup in imports.

The trade data will remain closely watched for signs of any fallout from what threatens to become a protracted trade war with China, Europe and Canada. At the same time, rising demand by U.S. households and businesses means purchases of foreign- made goods will probably remain resilient in coming months.

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President Donald Trump has already imposed levies on imported steel, aluminum, solar panels and washing machines. Tariffs on $34 billion of Chinese goods took effect July 6 at 12:01 a.m. in Washington, spurring retaliation from China.

The median estimate of economists surveyed by Bloomberg News called for a May trade deficit of $43.6 billion.

The report also showed the trade gap with China, the world’s second-biggest economy, widened to $32 billion in May from $30.8 billion.

Overall exports increased 1.9% to $215.3 billion as soybean shipments overseas almost doubled to $4.1 billion. Exports of civilian aircraft, a category that tends to be volatile, rose $1.9 billion in May.

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Imports rose 0.4% to $258.4 billion, boosted by a record value of capital goods shipments from overseas.

Improvement in the trade gap may be a positive for second- quarter growth. Net exports subtracted 0.04%age point from gross domestic product growth of 2% over the January-to-March period, according to revised figures, while previous estimates had shown a modest contribution.

Other Details

After eliminating the influence of prices, which renders the numbers used to calculate GDP, the trade deficit shrank to $75.3 billion, the smallest since March 2017, from $77.5 billion in the prior month

Exports and imports of goods accounts for about three-fourths of America’s total trade; the U.S. typically runs a deficit in merchandise trade and a surplus in services

With assistance by Chris Middleton