Increasing Exports in December Brought Down US Trade Deficit

American exporters exceeded economists’ expectations in December and hit one and a half year highs as it outpaced the growth in imports, lowering the total monthly trade deficit by 3.2% to $44.3B – however the deficit did increase over a yearly basis for 2016.  As part of his plan to spur economic growth in America, increasing exports will be a key part on the process according to Trump and his appointed officials that have spoken on the issue.  He has vowed to make sweeping changes to US trade policy, including pulling out the Trans-Pacific Partnership, likely meaning he will introduce his own trade agreement after he and his advisers put together a plan he believes benefits America more.

He has also proposed renegotiating the NAFTA trade agreement, and since and are two of America’s biggest trading partners, working out an agreement more beneficial to America could have a significant positive impact.  In December, total exports grew to $190.7B the highest since early 2015, but US financial markets saw little change because of the report as the government had published a similar estimate in January.  Shipments of advanced technology goods saw a sizable increase, with exports of aerospace, biotechnology, and electronics all hitting record highs.  American auto manufacturers, industrial supplies and raw materials and capital goods also saw rising exports.

Exports to the EU grew by over 10%, with among the leaders growing by a whopping 12.4%.  However, exports to fell by 4.1% and Trump has made it a priority to pressure them into acting more in line with American interests, possibly meaning we may see this trend reversed. Both imports from and exports too decreased with last year, with the imports falling more resulting an overall lower deficit over the year down to $347B (down by a little over $20B) in 2016.  However, the dollar gained 4.4% against its most prominent trading partners last year, so the president has proposed weakening the dollar to increase exports on a yearly basis.  He reiterated that view last week in a meeting with pharmaceutical executives, claiming countries like and Germany devalued their currency to gain an unfair advantage.

Imports of good also rose in December, partly due to the increasing oil prices inflating the total bill, and rising domestic demand as America reaches maximum employment.  Food imports and motor vehicle imports also increased.  With domestic unemployment reaching an optimal level and the renegotiation of trade negotiations underway, it remains to be seen whether exports increase or decrease this year, however the year is off to a good start.

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