Tomorrow, the Commerce Department will release the U.S. trade balance numbers from February. Here are five things to watch for when the report comes out.
A Strong U.S. Economy Can Widen the Trade Deficit
The American economy has been particularly strong, with positive job and wage growth. What does that mean for the trade deficit? Americans have money, and they are spending it on foreign goods. Even with the trade war, American imports from consumer goods from China are high and will remain there as long as Americans have money for iPhones, clothes, and toys made in China.
Slow Growth Around the World Might Mean Trouble
The U.S. economy might be consistently growing, but that growth is not universal. Both China and Europe have seen their economies slowing recently, which translates to fewer imports for them. Add the fact that the dollar is strong, and it makes sense that demand for American goods is going down.
The Numbers Have Been a Little Jumpy
The trade balance has bounced around since the end of 2018, leading to some big headlines about the trade deficit. In December, the deficit hit a record high. Many economists and journalists were quick to point out the irony of the news because Trump had promised to make the opposite happen, even though a low deficit is not the indicator of a strong economy that he argued it was. Then, the deficit came back down as American agricultural exports grew while demand for imported goods saw a decline.
Now, economists are predicting that the deficit will widen again to about $53 billion as the effects of the global slowdown wash up on American shores and reach American ports.
Those Trump Tax Cuts Might Have Made Americans Too Ready to Spend
A change to tax returns is not the only surprise for Americans post-Trump tax reform. The fiscal stimulus that the change in taxes caused last year encouraged more Americans to spend, and since Americans tend to spend a lot on imported goods, imports have increased. Economists say that trend should continue, and it will contribute to the widening of the deficit.
An Unpredictable Trade War Might Be Hard on Americans
The deficit can be a hard number to forecast. An economist’s outlook only gets foggier when the politics driving trade are even harder to predict. No one really knows what might be in the future for trade talks between the U.S. and China, and because of that, American importers, producers, and farmers might ultimately react to the uncertainty itself. Stockpiling has become more common recently to the point that some ports are reaching capacity.