Trade deficit returns to earth in April following surge in March

Summary

• The U.S. deficit in international trade in goods and services narrowed to $87.1 billion in April, following a record deficit of $107.7 billion in March.

• The one-off surge in imports in March was partially reversed in April. Exports of goods and services rose again in April on broad-based strength.

• The real trade deficit also narrowed significantly in April. Whereas real net exports were a significant drag on the headline rate of GDP growth in the first quarter, we look for them to make a modestly positive contribution to overall GDP growth in Q2.

• The value of American petroleum exports in the first four months of the year exceeded the value of U.S. imports of petroleum over the same period.

Imports in April pull back following one-off surge in March

The U.S. deficit in international trade in goods and services, which plunged to an all-time record of $107.7 billion in March, rebounded to "only" $87.1 billion in April. The international trade data have been unusually volatile in recent months due to the distortions of the lingering pandemic and supply chain bottlenecks. That said, the deficit has widened on trend over the past two years because the U.S. economy has generally grown faster than most of its major trading partners over that period. Consequently, the value of American imports has grown more than the value of U.S. exports. In addition, the appreciation of the U.S. dollar over the past year or so has also contributed to the widening in the trade deficit recently.

Preliminary data on trade in goods, which were released two weeks ago, showed that the $29 billion surge in goods imports in March was partially reversed in April (Figure 1). The revised data that were released today confirmed this seesaw pattern for total goods imports. Other than imports of motor vehicles, which continue to trend higher due to some thawing in supply chain bottlenecks, most of the major categories of imports gave back part of their extraordinary surges that occurred in March. On the other side of the ledger, exports of goods, which increased $9.6 billion in March, rose by another $6.1 billion in April as all major categories of goods exports posted solid gains. Exports of services, which were not reported in the preliminary trade data two weeks ago, were up $2.4 billion in April. The rise in exports of goods and services and the decline in total imports in April caused the overall trade deficit to narrow for the first time since October.

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