Weak Import Demand Blunts U.S. Trade Deficit

The overall U.S. trade deficit in January dropped to its lowest level in six years, not as a result of strong U.S. export performance but because of weak U.S. demand for imported goods, the Commerce Department reported March 13.

The U.S. trade deficit for January was $36 billion, the smallest deficit since October 2002. The January deficit was 9.7 percent lower than the unrevised $39.9 billion trade gap in December.

Both U.S. imports and exports have fallen for the last six months, but imports fell faster than exports in January, leading to a deficit that was smaller than economists anticipated.

U.S. imports of goods dropped 7.7 percent in January, reaching their lowest level since September 2004. Imports of autos and auto parts plummeted 22.2 percent to their lowest level since July 1998, while imports of industrial supplies and capital goods fell to their lowest levels since 2004 and 2005, respectively. U.S. exports of goods dropped 7.4 percent, to their lowest level since February 2006.

Despite the decline in the overall trade deficit, the U.S. trade deficit with China rose to $20.57 billion, up from $19.88 billion in December 2008. Critics of Chinese trade policy were quick to react.

“The most striking thing about January's trade data is not the declining overall trade deficit, but rather the growing imbalance with China,” said Scott Paul, executive director, the Alliance for American Manufacturing.

“The knowledge that China now accounts for more than 60 percent of the U.S. trade deficit in manufactured goods should be setting off alarm bells for President Obama and the Congress,” said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.

“The United States will not be able to jumpstart its economy unless it stops trade cheats like China from decimating U.S. manufacturing,” Tantillo added.

Contact Alan M. Field at afield@joc.com.