The U.S. trade deficit with China decreased to the narrowest in almost three years as imports slowed and exports advanced, offering President Donald Trump a chance to claim his tariff war is yielding the desired results just as negotiations reach a critical stage.
The merchandise gap with China shrank to $28.3 billion in March, according to a Commerce Department report May 9 that also showed the overall U.S. deficit in goods and services widened to $50 billion. That nearly matched the $50.1 billion estimate in Bloomberg’s survey.
Overall exports increased 1% to $212 billion, boosted by a 39% jump in soybean shipments. Imports climbed 1.1% to $262 billion on gains in oil, food, vehicles and pharmaceuticals. The overall merchandise-trade deficit widened 0.7% to $72.4 billion.
While tensions between the world’s largest economies flared this week after Trump upended months of talks with threats of fresh levies, the two sides had been signaling most of this year they were nearing an accord. China’s top negotiator was due in Washington on May 9 to continue the discussions before tariffs rise May 10.
The narrower gap with China obscures a sharp drop in trade between the nations. Imports from the Asian country dropped 13.6% in the first quarter from a year earlier, to $118.8 billion, while exports plunged 17.6% to $27.2 billion. For March, exports were the highest since mid-2018 while imports were the lowest since 2016.
Net exports have helped boost U.S. growth, adding a full point to gross domestic product in the first quarter after previously dragging on the expansion. At the same time, exporters have been confronting a dimmer outlook for global growth, while an inventory overhang may weigh on imports.
The data may be starting to reflect some fallout from the global grounding of Boeing Co.’s 737 Max jet after a second crash in March, with civilian aircraft exports decreasing to $5.1 billion from $5.8 billion. In February, the trade gap had unexpectedly narrowed on a surge in that category.
China, meanwhile, reported earlier this week that April exports to the United States fell 13.1% from a year earlier in dollar terms. That was the most since 2009 outside of January or February, months distorted by the timing of Lunar New Year. Global exports from the country dropped 2.7% as imports expanded by 4%.
The March U.S. trade data followed two months of a narrowing trade gap, with a revised $49.3 billion deficit in February that was slightly smaller than initially reported.