U.S. Trade Deficit Climbs To $47 Billion

| by Robert Fowler
The deck of a cargo shipThe deck of a cargo ship

The good news is that the amount of U.S. exports increased incrementally in February. The bad news is that the amount of imports increased even more, leading to a widening of the trade deficit to $47.1 billion, the highest in the preceding six months.

Economists had predicted a February trade deficit of $46.2 billion, making the actual figure a disappointment. The growing strength of the U.S. dollar has actually contributed to the problem.

While the U.S. continues to recover economically, the global marketplace is currently weakened. As a result, goods manufactured in the U.S. become more expensive for foreign buyers.

"American economic demand is stronger than abroad," senior economist David Sloan of 4Cast Inc. told Bloomberg. He added that the weakened global economy will result in a "slow and steady gradual increase in the deficit, which will be a modest drag on growth in the U.S."

U.S. imports rose on goods such as pharmaceuticals, civilian aircrafts, toys, and electronics in February. Imports on food reached a new record while oil imports dipped to their lowest level since September 2002.

Meanwhile, U.S. exports rose by one percent but saw a disappointing drop in goods such as industrial supplies and machinery.

However, while the trade deficit of U.S. goods has grown, its services industry exports grew five percentage points. The service sector makes up over two-thirds of the American economy, according to Reuters.

“For the most part, today’s reports point to a domestic economy that is in good shape,” said chief economist Joel Naroff of Naroff Economic Advisors in Holland, Pennsylvania. “First-quarter growth looks like it may be a little less solid than hoped for, but the underlying data indicate all is still well.”

The trade deficit has been a political bullet point during the 2016 presidential election. While it continues to grow in fits and starts, it is not entirely indicative of whether or not the U.S. economy is flourishing.

In a Herald & Review op-ed, Chicago Tribune columnist Steve Chapman stated that while the U.S. bought more than it sold when it came to goods, much of that lost revenue was reinvested into America anyway by international trade partners.

“If foreigners want to buy land or buildings or bonds in the U.S., they need dollars,” Chapman wrote. “To get dollars, they have to sell to Americans.”

Chapman added “The little-known secret of international commerce is that foreigners can't invest more here than we invest abroad unless they also sell us more than we sell them.”

Sources: Bloomberg, Herald & Review, Reuters / Photo Credit: Danny Cornelissen / Wikimedia Commons

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