Trade Deficit Worsens in March

Imports rose to a four year high in March on higher crude oil shipments, with oil prices at a six month high, while imports from China declined. The monthly trade deficit rose to -$63.9B (consensus -$60B), over a ten percent rise from the prior month's trade deficit. February's deficit was revised lower by $500m to -$57.9B.

Both imports and exports were at their second highest levels on record. Consumer goods imports rose to a record high in March. Total imports of goods and services rose +4.5% MoM, representing the largest monthly gain in 4.5 years. Exports rose +1.8% MoM on record sales of industrial supplies and autos. The weaker dollar is helping to make US goods more competitive globally, though it has only fallen -3.1% YoY against a trade weighted basket of currencies.

The trade deficit with China narrowed by over a billion dollars last month as imports from China fell to the lowest level in the past ten months. China is the U.S.'s second largest trading partner, and is trying to deflect rising protectionist sentiment in the U.S. The U.S. trade deficits widened with the EU, Canada, and Mexico in March, while holding steady with Japan.

First quarter GDP estimates are likely to be revised lower based on this data.

A slowing U.S. economy, combined with robust growth in other parts of the world, are anticipated to help the U.S. trade deficit trend lower this year.