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The numbers: The U.S. trade deficit shrank 2.1% in April — before the Trump tariffs took effect — and tumbled to a seven-month low. But the gap is still on track to widen in 2018 to the highest level in a decade.
The deficit declined to $46.2 billion in April from a revised $47.2 billion in March, the Commerce Department said Wednesday. Economists polled by MarketWatch had forecast a $48.8 billion gap.
What happened: Exports edged up 0.3% to a record $211.2 billion. The U.S. shipped out the most domestically produced petroleum in five years, along with more soybeans and corn.
Exports to Mexico also hit an all-time high, but the U.S. trade gap is still larger at this point in the year than it was in the first four months of 2017.
Exports of commercial aircraft fell sharply in April, but it’s a volatile category that jumps around from month to month.
Imports, meanwhile, slipped by 0.2% to $257.4 billion. The U.S. imported fewer cell phones, consumer electronics and foreign autos.
The U.S. trade deficit in goods with China fell sharply because of a drop in imports, but the decline is probably unrelated to pending tariffs on billions in Chinese goods.
U.S. merchants could actually import more Chinese goods in May to take advantage of lower prices before the tariffs kick in.
Big picture: The large U.S. trade deficit has become Public Enemy No. 1 in the view of President Trump, who’s unveiled broad tariffs on an array of foreign goods to try to force other countries to rework trade deals he views as unfair.
The White House’s tough approach has unnerved financial markets and invited retaliation, but a much-feared trade war that damages the global economy has so far been averted.
The U.S. is still on track to post another huge deficit that could reach nearly $600 billion in 2018, but the recent decline is likely to give a boost to gross domestic product in the second quarter. A smaller trade deficit increases GDP.
What they are saying?: “The big question going forward is how the trade ledger is affected by the Trump administration’s recent tariff decisions and reciprocal retaliation by the EU, Canada and Mexico, not to mention the recent strengthening of the dollar and jump in oil prices,” wrote Gregory Daco, chief U.S. economist at Oxford Economics.
For now he doesn’t see trade tensions harming the U.S. economy in any big way.
Market reaction:The Dow Jones Industrial Average and the S&P 500 rose in Wednesday trades. The 10-year Treasury yield rose a few basis points to 2.96%.