Kiplinger Trade Outlook: Trade Gap Widens to a New Peak
Importers are rushing in orders before new or threatened tariffs take effect.
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The U.S. trade deficit in goods and services ballooned in January to its highest level since 1992. It hit a seasonally adjusted $131.4 billion that month, from a downwardly revised $98.1 billion in December — a 34% monthly increase. The trade deficit is a measure of the difference between what the United States buys from foreign nations and what it sells overseas. The data show U.S. companies were getting ahead of new tariffs by fast-tracking orders before the levies took effect. With further tariff announcements due in April, including reciprocal tariffs to retaliate against countries that discriminate against U.S. exports, the jump in the trade deficit is unlikely to reverse much any time soon. The dollar’s strength will continue to support import growth, and along with softening economic activity in advanced economies, will weigh on demand for U.S. goods abroad.
Strength in exports in January was broad-based. Total exports rose 1.2% from the previous month. Over the past year, total exports are up 4.1% (but that pales in comparison with the 23.1% annual increase in imports). Exports of consumer and capital goods rose 8.5% and 8.1%, respectively. Exports of foods, feeds and beverages fell 7.2%. With China’s economy yet to meaningfully stabilize, growth across the eurozone showing signs of fragility, and the Federal Reserve moving slower than some international banks to lower interest rates, export growth is likely to weaken over the next few months.

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Imports surged in January as businesses rushed to beat tariffs, up 10% from the previous month. Most of the gain was tied to a 35% increase in imported industrial supplies, which include products spanning crude oil, metals and fertilizers. Within this category, inflows of finished metal shapes accounted for most of the gain. Imports of consumer goods rose 8.3%. Within this category, imports of cell phones increased 12% for the month, which may reflect retailers and wholesalers boosting inventories before additional tariffs on Chinese goods took effect in early February. Imports have outpaced exports on average during the past eight months, keeping the trade deficit on a widening trajectory throughout 2024.
The surge in imports is likely to dent GDP growth in the first quarter. In real terms, goods imports surged by 12.4%, while exports were up by only 0.4% in January. In GDP accounting, imports subtract from overall growth, while exports add to it.
Source: Department of Commerce, Trade Data
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Rodrigo Sermeño covers the financial services, housing, small business, and cryptocurrency industries for The Kiplinger Letter. Before joining Kiplinger in 2014, he worked for several think tanks and non-profit organizations in Washington, D.C., including the New America Foundation, the Streit Council, and the Arca Foundation. Rodrigo graduated from George Mason University with a bachelor's degree in international affairs. He also holds a master's in public policy from George Mason University's Schar School of Policy and Government.
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