WASHINGTON (Dispatches) – U.S. trade deficit increased to the highest level in more than nine years in January, suggesting the Donald Trump administration's America First trade policy was unlikely to close the trade gap.
The U.S. exports fell 1.3 percent from December on a seasonally adjusted pace to 200.9 billion U.S. dollars in January, while the imports remained unchanged at 257.5 billion dollars in the month, said the Commerce Department.
This left a deficit of 56.6 billion dollars in the month, rising for five consecutive months and hitting the highest level since October 2008.
Deficit in trade of goods with China increased 1.5 billion dollars to 35.5 billion dollars in January.
U.S. President Trump has said that trade deficit reduction was one of the priorities for the administration's trade policy.
Last week, he announced plans to impose 25 percent tariff on imported steel and 10 percent on aluminum to protect domestic industries.
The protectionist measures have sparked widespread oppositions from U.S. domestic business groups and trade partners, who are arguing that the actions would hurt both the U.S. and global economies, and undermine global trade system.
Trump’s "America First” trade policies are part of an attempt to boost annual economic growth to 3 percent on a sustainable basis. The government in January slashed corporate and individual income taxes.
But with the economy almost at full employment, the increase in demand spurred by the $1.5 trillion tax package will probably be satisfied with imports, further worsening the trade deficit.
The economy’s strong fundamentals were underscored by a separate report from ADP Research Institute showing private employers added 235,000 jobs in February.
The report, which is jointly developed with Moody’s Analytics, was published ahead of the government’s more comprehensive employment data on Friday.
According to a Reuters survey of economists, nonfarm payrolls probably increased by 200,000 jobs last month, matching January’s gains. The unemployment rate is forecast falling one-tenth of a percentage point to 4.0 percent, which would be the lowest level since December 2000.
The surge in the January trade deficit was flagged by an advance goods trade deficit report last week. When adjusted for inflation, the trade deficit increased to $69.7 billion from $68.5 billion in December.
The so-called real trade deficit is above the fourth-quarter average of $66.8 billion. This suggests trade would subtract from first-quarter gross domestic product unless the deficit shrinks in February and March. Trade sliced 1.13 percentage points from fourth-quarter GDP growth.
"Strong growth in U.S. domestic demand should continue to pull in non-petroleum imports going forward,” said Jay Bryson, global economist at Wells Fargo Securities in Charlotte, North Carolina. "Net exports likely will exert another significant drag on overall GDP growth in the first quarter.”
The economy grew at a 2.5 percent annualized rate in the fourth quarter. Growth estimates for the first quarter are around a 2.0 percent pace.