WASHINGTON: The U.S. goods trade deficit with China, a focus of President Donald Trump's "America First" agenda dropped to a five-year low in March amid a surge in exports, including soybeans.
The report from the Commerce Department on Thursday came amid escalating trade tensions between Washington and Beijing. Trump said on Sunday he would raise tariffs on US$200 billion worth of Chinese goods from 10 to 25 percent on Friday. China has promised to retaliate if the duties were imposed.
Reuters, citing U.S. government sources, reported on Wednesday that China had backtracked on almost all aspects of a trade deal between Washington and Beijing.
The politically sensitive goods trade deficit with China decreased 16.2 percent to an unadjusted US$20.7 billion, the lowest level since March 2014, also as imports from the world's No. 2 economy fell 6.1 percent. Exports to China jumped 23.6 percent in March.
When adjusted for seasonal fluctuations, the shortfall with China tightened to US$28.3 billion. That was the smallest since April 2016 and followed a US$30.1 billion gap in February.
Washington last year imposed tariffs on US$250 billion worth of goods imported from China, with Beijing hitting back with duties on US$110 billion worth of American products.
The overall trade deficit increased 1.5 percent to US$50.0 billion in March. Economists polled by Reuters had forecast the trade shortfall widening to US$50.2 billion in March. The goods trade deficit increased 0.7 percent to US$72.4 billion in March.
The trade data have been volatile in recent months amid big swings between exports and imports because of the United States' conflicts with trading partners. The goods trade deficit with Mexico hit a record high of US$9.5 billion in March.
When adjusted for inflation, the overall goods trade deficit increased US$0.5 billion to US$82.1 billion in March.
U.S. financial markets were little moved by the data.
The government reported last month that trade contributed 1.03 percentage points to the economy's 3.2 percent annualized growth pace in the first quarter. But relatively weak advance wholesale and retail inventory data for March has led economists to expect the initial GDP growth estimate would be trimmed to just below a 3.0 percent rate when the government publishes its revision later this month.
The economy continued to expand early in the second quarter, with mild inflation pressures and the labor market still tightening. Initial claims for state unemployment benefits decreased 2,000 to a seasonally adjusted 228,000 for the week ended May 4, the Labor Department said in other data on Thursday.
The producer price index for final demand increased 0.2 percent last month after jumping 0.6 percent in March. In the 12 months through April, the PPI increased 2.2 percent, matching March's rise, the department said in another report.
Price pressures have remained moderate despite a strong economy and the tightening labor market. The U.S. central bank last week kept interest rates unchanged and signaled little desire to adjust monetary policy anytime soon. Fed Chairman Jerome Powell said inflation had been "somewhat weaker," but believed the softer readings "may wind up being transient."
The rise in the overall trade deficit in March came as both exports and imports increased. Goods exports increased 1.4 percent to US$141.7 billion. Exports of industrial supplies and materials rose by US$1.7 billion, while those of soybeans gained by US$0.5 billion.
But shipments of civilian aircraft fell US$0.7 billion in March. Commercial aircraft exports are likely to decline further after Boeing suspended deliveries of its troubled 737 MAX aircraft. The MAX planes have been grounded indefinitely following two deadly crashes.
Goods imports rose 1.2 percent to US$214.1 billion in March. Crude oil imports increased by US$1.4 billion. Crude oil imports rose to 195.9 million barrels from 173.7 million barrels in February. Imported oil prices averaged US$53.1 per barrel in March, up from US$46.89 in February.
Food imports hit an all-time high of US$13.1 billion. Consumer goods imports, however, fell amid declines in imports of cellphones and other household goods. Imports of industrial supplies and materials increased by US$2.4 billion.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)