Trade gap narrows as imports continue to fall in June

Summary

With trade policy still in flux, volatility is not going anywhere. However, the most massive swings in trade are now behind us. Look for a modest lift from trade in the remaining quarters of the year. To gauge the larger impact of tariffs, look instead at how firms are prioritizing their spending: favoring intellectual property outlays over property, plant and equipment.

Premature to call this evidence of tariffs "working"

If you're on the hunt for evidence of how the trade war is impacting the U.S. economy, the international trade data might not yet show it. The U.S. trade deficit narrowed in June to the smallest in nearly two years (chart). This has resulted in some wacky effects on headline GDP growth, but the sharp narrowing in the deficit is simply an unwinding of behavioral effects as businesses slowed their imports after pulling demand forward at the start of the year to get goods ahead of tariffs going into effect.

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