Trade deficit widened as the pandemic sapped global commerce, affected supply chains.
U. S. exports and imports both posted their largest monthly decreases on record amid coronavirus-related shutdowns around the world.
Imports fell 13.7% in April from March, and exports dropped 20.5%, the largest declines since record-keeping began in 1992, the Commerce Department reported Thursday. The trade deficit expanded 16.7% to a seasonally adjusted $49.41 billion.
“Beyond the fact that we’re seeing a significant widening of the trade deficit, what really strikes me is the pace at which trade flows are declining,” with imports and exports down about a quarter since the coronavirus outbreak, said Gregory Daco, chief U.S. economist at Oxford Economics.
Exports of aircraft and cars have dropped as manufacturers such as Boeing Co. were hit by the world-wide disruption of travel and auto makers including Ford Motor Co. closed factories to prevent the spread of the virus.
“We’re reopening fast enough that import demand will pick up faster than export demand,” said Joel Naroff, president of Naroff Economic Advisors. “We’ll have more total activity as we go forward but the trade deficit is likely to widen.”
Global trade flows may start to pick up again as some factories reopen and the easing of social-distancing measures revives consumer demand.
“Much of the disruption may have already occurred,” Angeliki Frangou, chief executive of container ship operator Navios Maritime Containers LP, said on an earnings call last month. “As countries emerge from quarantine and return to work, we expect volumes to pick up, particularly in the second half of 2020.”
Exports of goods in April were the lowest since late 2009, when the nation was recovering from a deep recession, Thursday’s report showed Imports of goods were the lowest since late 2010.
A similar trend was seen in Canada, where the goods trade deficit widened in April as exports plunged to their lowest level in over a decade. Statistics Canada attributed the dramatic drops in exports and imports to factory shutdowns, weaker energy prices and widespread economic restrictions as authorities moved to contain the spread of the new coronavirus.
While the U.S. usually runs a deficit in goods, it runs a surplus in services. That surplus, in services such as medical care, travel, higher education and royalties, decreased by $1.3 billion in April to $22.4 billion, its lowest since December 2016.
In the first quarter, a narrowing trade deficit helped limit a sharp contraction in the U.S. economy. As a whole, the economy still shrank at a 5% annual rate, the steepest drop since the last recession. Trade is expected to subtract from gross domestic product this quarter should the deficit continue to widen.
The U.S. deficit in goods with China widened to $25.96 billion from $16.99 billion the prior month. Year to date, the deficit with China amounts to $87.60 billion, compared with $123.68 billion in the same period of 2019.
Chinese state-controlled companies have canceled some shipments from U.S. farm exporters, according to maritime officials, as tensions between Washington and Beijing rise over China’s handling of pro-democracy protests in Hong Kong and the coronavirus pandemic. The cancellations involve orders made following the phase-one trade pact between the two countries signed in January, in which China committed to increasing farm imports from the U.S.
Lockdowns associated with the pandemic, which originated in China late last year, have sapped global commerce and growth, disrupted supply chains and closed factories and stores.
The International Monetary Fund said in April that it expected the U.S. economy would shrink 5.9% this year. It predicted the global economy would contract 3% in 2020. China’s growth would slow to 1.2% this year, the IMF projected, from 6.1% last year.
Global trade, already experiencing its weakest activity since the 2008-09 financial crisis because of the two-year U.S.-China trade conflict, is likely to contract by 11% in 2020, the IMF said, a collapse that would make it difficult for countries to revive their economies by increasing exports.