(March 12): The US trade deficit narrowed in January as exports increased, coming off of a turbulent year for domestic importers contending with erratic tariff policy.
The gap in goods and services trade shrank more than 25% from the prior month to US$54.5 billion ($69.5 billion), Commerce Department data showed Thursday. The median estimate in a Bloomberg survey of economists called for a US$66 billion deficit.
Exports increased 5.5% in January from the prior month, fuelled by outbound shipments of nonmonetary gold and other precious metals, as well as computers and aircraft. Overall imports fell 0.7%, reflecting a decline in pharmaceuticals.
Trade flows last year were subject to large monthly swings as US importers reacted to a slew of tariff announcements from President Donald Trump. His administration has attempted to use higher import duties as part of a policy aimed at reducing reliance on foreign goods, encouraging domestic investment and reversing decades of manufacturing decline.
Tariff rates were unchanged in January, but that was before the US Supreme Court struck down many of Trump’s tariffs on Feb 20, prompting the president to impose them using different authorities.
Bloomberg Economics said a key question for 2026 is whether retailers will rebuild inventories by ramping up imports or shifting toward domestic production. Meanwhile, the war in Iran launched by the US and Israel on Feb 28 also stands to affect shipping and trade with Middle East countries.
See also: US jobless claims ticked down to 213,000 last week
The latest trade data will help economists firm up their estimates for first-quarter gross domestic product. Before the figures, the Federal Reserve Bank of Atlanta’s GDPNow forecast indicated net exports may subtract a half percentage point from first-quarter gross domestic product. Net exports barely added to growth in the fourth quarter.
On an inflation-adjusted basis, which filters into the real GDP measurement, the merchandise trade deficit narrowed to US$83.9 billion in January.
The deficit with China widened slightly from a month earlier after narrowing last year to the smallest in more than two decades. The shortfalls with Canada and Mexico shrank.
See also: US mortgage rates climb to 6.19% in biggest gain since September
Separate data out Thursday showed little change in initial jobless claims last week, while housing starts climbed in January on new construction of multi-family projects.
Uploaded by Magessan Varatharaja
