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US DATA: Trade Deficit Edging Wider With Tariffs In View

US DATA
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November's advance trade deficit was a little wider than October's, with the $102.9B shortfall above $98.3B prior ( and $101.2B expected). 

  • On a year-on-year basis, exports have risen 6% with imports up 7% (non-seasonally adjusted), with the relatively stronger import growth (on a much higher base) leaving the seasonally-adjusted deficit up $14B. A rough estimate puts the 3-month moving average deficit at 4.2% of GDP, which would be the highest seen since August 2022. That squares with an apparent rebound in goods demand and a bottoming of core goods prices, per recent data releases.
  • When incorporating positive services net exports, the deficit is closer to 3% of GDP, but we only get that data in the final trade release. October's trade deficit (goods and services) registered $73.8B vs $83.8B in September, about $1B smaller than expected, with a 4% drop in imports outpacing a 1.6% fall in exports. September's nominal trade deficit was the largest ever, so a snap-back was anticipated.
  • Within October's import pullback, as we noted after the advance goods trade release last month, the most notable line item was a sharp fall in capital goods: the 8.7% M/M drop (to $78,7B, ex-automotive) was easily the sharpest since the pandemic. That's slightly jarring given that strong capital goods imports appeared to be a signal that US capital investment continued to be robust through Q3, corroborated in part by a stabilization in domestic durable goods orders. As such one positive in November's advance data was a re-stabilization in capital goods imports (+4.3% to $82.1B).
  • Of course the big question heading into 2025 is what degree tariffs will be imposed, and how it will impact the trade data. It's plausible we could see the deficit widen in the short run if importers attempt to front-run the imposition of tariffs: there is some evidence for example that Chinese exports picked up sharply in November, with anecdotes of US corporates adjusting their import strategies (see the latest ISM Manufacturing report). In any case the trend since late-2023 has been toward a wider deficit, largely capital-goods driven. 
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November's advance trade deficit was a little wider than October's, with the $102.9B shortfall above $98.3B prior ( and $101.2B expected). 

  • On a year-on-year basis, exports have risen 6% with imports up 7% (non-seasonally adjusted), with the relatively stronger import growth (on a much higher base) leaving the seasonally-adjusted deficit up $14B. A rough estimate puts the 3-month moving average deficit at 4.2% of GDP, which would be the highest seen since August 2022. That squares with an apparent rebound in goods demand and a bottoming of core goods prices, per recent data releases.
  • When incorporating positive services net exports, the deficit is closer to 3% of GDP, but we only get that data in the final trade release. October's trade deficit (goods and services) registered $73.8B vs $83.8B in September, about $1B smaller than expected, with a 4% drop in imports outpacing a 1.6% fall in exports. September's nominal trade deficit was the largest ever, so a snap-back was anticipated.
  • Within October's import pullback, as we noted after the advance goods trade release last month, the most notable line item was a sharp fall in capital goods: the 8.7% M/M drop (to $78,7B, ex-automotive) was easily the sharpest since the pandemic. That's slightly jarring given that strong capital goods imports appeared to be a signal that US capital investment continued to be robust through Q3, corroborated in part by a stabilization in domestic durable goods orders. As such one positive in November's advance data was a re-stabilization in capital goods imports (+4.3% to $82.1B).
  • Of course the big question heading into 2025 is what degree tariffs will be imposed, and how it will impact the trade data. It's plausible we could see the deficit widen in the short run if importers attempt to front-run the imposition of tariffs: there is some evidence for example that Chinese exports picked up sharply in November, with anecdotes of US corporates adjusting their import strategies (see the latest ISM Manufacturing report). In any case the trend since late-2023 has been toward a wider deficit, largely capital-goods driven. 
us trade