The first report of the Commerce Department’s May data, released today, showed the United States lost ground in both exports and imports in April, suggesting trade might not prove a significant fiscal drag for President Trump in 2019.
The news is another indication that international markets continue to resist the negative pressures of the global economy.
In April, the United States’ trade deficit widened to $65.05 billion (not seasonally adjusted), largely driven by a rise in imports. Imports from the United States have been on a steady upward trajectory in recent months, making it evident that U.S. goods producers cannot export much goods to countries abroad who are in far worse economic straits.
On the other hand, exports have been falling steadily, which is an important area of concern for the administration. Import trends have remained fairly stable in the past several months, giving investors hope that the market will rebalance the trade imbalance.
On the day of the report, the New York Mercantile Exchange’s U.S. Dollar Index was at its lowest point since April 7. The Index, which measures the value of the dollar against a basket of other currencies, saw the dollar drop to as low as $1.27564 against the euro in early May and $0.9565 against the pound in late May.
With the dollar recovering considerably from those lows and trading as high as $1.3260 against the euro in the European session, it’s safe to say that the market has again taken a firmer stance on trade tensions.
Shares of several major U.S. exporters increased on the day, the biggest gainer being 3M, up 2.56 percent. Companies that make a large percentage of their sales in foreign markets also saw their stocks gain. Adidas saw its shares rise by 2.43 percent; Nike rose 2.29 percent; and Kimberly-Clark shares increased by 2.29 percent.
The data are important for Trump because the United States International Trade Commission estimated in April that the average increase in U.S. exports in the first quarter of this year was 1.8 percent, while imports were up 0.8 percent, which contributed to a $28.3 billion trade deficit.
If U.S. trade with China decreases by less than 10 percent, as the administration is seeking, Trump will be guaranteed a major victory. On the other hand, if U.S. exports to China were to drop by more than 20 percent, or imports from China by 30 percent, it could be a very tough year for the president.
Along with China, Trump is pushing other trade disputes with other countries. In March, he launched a dispute with Canada, and is battling the European Union for higher trade barriers.
Trump has already negotiated agreements with Mexico and Canada to curb new automotive barriers under the North American Free Trade Agreement. But while the countries may come to terms quickly, the EU appears stubborn in its stance on continuing to treat European manufacturers and farmers as competitors, even as its own economy falls into a recession.
He also has used trade to protect domestic companies from foreign competition. He pulled out of the North American Free Trade Agreement and pursued unilateral tariffs. At times, his administration has reduced American participation in free trade, imposing tariffs or levies on imports of steel and aluminum and other products from China and Mexico, though not on the UK or Canada.