WRAPUP 2-US trade deficit narrows sharply; labor market tightening

by Leon Thompson May 5, 2018, 1:27
WRAPUP 2-US trade deficit narrows sharply; labor market tightening

Record exports trimmed the USA trade deficit in March, the first drop in seven months in a massive gap that President Donald Trump is determined to shrink with an aggressive America first policy.

Canada's trade surplus with the United States, meanwhile, narrowed for a fifth consecutive month, from Can$2.3 billion in February to Can$1.7 billion in March.

The government's figures closely matched analysts' expectations and represented the largest one-month decline in the trade deficit in two years, Efe reported.

Mr Trump wants to drastically cut America's trade deficit, particularly its deficit with China, saying that it will protect American jobs and bolster national security.

The U.S. trade deficit in goods with Mexico was the largest on record in March, while the U.S. trade surplus in goods with the United Kingdom hit a record high. But according to Reuters, that "will probably do little to ease tensions between the United States and China".

China, which denies it coerces such technology transfers, has threatened retaliation in equal measure, including tariffs on US soybeans and aircraft. He recently slapped 25 per cent import duties on steel and 10 per cent on aluminium.

The first-quarter goods trade deficit with Mexico is the largest ever recorded at $33.3 billion, up from $30.6 billion for the same period previous year. But that was offset by a $69.5 billion deficit in the trade of goods.

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More broadly, the US trade gap has widened this year, increasing 18.5% in the first three months of 2018 compared with the same period a year earlier.

Exports rose in March to a record $208.5 billion, led by shipments of civilian aircraft and soybeans.

The purchases of cars and other consumer goods were the reasons behind the import rise.

So too were higher exports to Britain (unwrought gold), South Korea (aircraft) and Japan (copper and coal).

While March was a good month for soybean producers, the future spells trouble with escalating tariff threats between China and Washington.

Canadian imports climbed six per cent to $51.7 billion in March due to the motor vehicles and parts sector as well as consumer goods. Imports of capital goods fell by $1.5 billion, weighed down by declines in imports of computer accessories, telecommunications equipment and semiconductors.

The import side showed encouraging consumer demand, with passenger vehicles and light trucks up 13 per cent month over month, and consumer products up almost 8 per cent. Economists said the strength reflects Canada's continued strong labour market, as well as the acceleration in wage growth in recent months.

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