Trade deficit falls for April–not enough to take the heat out of increasingly hot tariff wars

The U.S. trade deficit narrowed more than expected in April. The deficit fell to $46.2 billion. Economists surveyed by had expected $48.8 billion. The March deficit was revised to $47.2 billion from an earlier report of $49 billion.

The trade deficit with China decreased by $3.4 billion to $30.8 billon in April.

There’s probably not enough here to take any of the heat out of the Group of 7 meeting that begins on Friday or out of the ongoing trade talks with China, Mexico and Canada. Yesterday Mexico said it would impose import duties on $3 billion worth of U.S. products, including cheese, bourbon, pork and others, as retaliation for U.S. tariffs on steel and aluminum. The Washington Post is reporting today that the White house is looking to impose additional economic penalties against Canada — the host nation for the G7 summit — in retaliation for Canada’s threat to levy tariffs next month on roughly $13 billion in U.S.-made products. The targets include orange juice, soy sauce, sleeping bags and inflatable boats. (The Post is reporting that Treasury Secretary Steven Mnuchin has been urging both sides to de-escalate tensions.) The Post also reports that White House officials are considering having Trump refuse to sign onto a customary joint agreement at the end of the G-7 summit.

All this trade madness aside there was good news in the April trade numbers for second quarter economic growth. The GDP report includes differences between imports and exports in its calculation of economic growth. For example the second estimate for first quarter GDP had net exports adding 0.08 percentage points to the 2.2% GDP growth.