US trade deficit falls in February as shortfall with China decreases 28%

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The U.S. goods and services deficit with its global trading partners fell to $49.4 billion in February, its lowest level since June 2018 and well below estimates, the Commerce Department reported Wednesday.

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Economists surveyed by Dow Jones expected the U.S. trade deficit in February to increase to $53.8 billion from $51.1 billion in January.

The decline was due in large part to a 28.2 percent decrease in its goods deficit with China as exports to the nation surged. Exports to China rose $1.6 billion to $9.2 billion while imports fell $1.5 billion to $39.3 billion. That brought the total deficit with China to $30.1 billion.

The report helped boost the view of Wall Street economists on first-quarter GDP growht, which now likely will come in above 2 percent.

Overall, exports for the month rose $2.3 billion to $209.7 billion, while imports increased $600 million to $259.1 billion.

On a year-to-date basis, the goods and services deficit fell 7.6 percent, or $8.3 billion, from the same period in 2018. Exports rose $11.1 billion, or 2.7 percent, while imports increased $2.8 billion, or 0.5 percent.

The move comes amid hopes that contentious trade negotiations between the U.S. and China soon will be resolved. The U.S. last year slapped tariffs on $250 billion worth of Chinese goods, prompting Beijing to institute its own duties against $110 billion worth of American imports.

Washington also has been engaged in trade talks with Japan. The deficit with that nation rose to $6.7 billion for the month, a 24 percent increase.

President Donald Trump has made reducing the trade deficit a cornerstone of his economic program. The imbalance hit a record $59.9 billion in December.

Exports rose in good part due to a surge in civilian aircraft orders, which showed a $2.2 billion increase, or 60.5 percent, from January. Semiconductors also rose more than 9 percent.

The report did not offer “particularly compelling reasons to be upbeat about economic prospects this year, but the figures do at least confirm that net trade will provide a substantial positive contribution to first-quarter GDP growth, which we now think was 2.0% annualized,” Michael Pearce, senior U.S. economist at Capital Economics, said in a note.

Indeed, J.P. Morgan raised its first-quarter view on GDP to 2.5 percent from 2 percent.

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