Tomorrow the U.S. Census Bureau will release the Advance International Trade Indicator report for March with significant impact from the coronavirus. Here are five things to watch for:
The trade deficit will narrow remarkably because of the coronavirus.
The U.S. outbreak has almost halted the economy, especially because of governors’ executive orders, including stay-at-home and social distancing. There is no doubt U.S. trade will show huge decreases in both exports and imports. What’s more, the plunge in oil imports made the trade much worse. “We are looking for a big drop in the trade deficit,” said Michael R. Englund, principal director and chief economist at Action Economics, a financial services company. “Essentially, a huge drop in oil prices through March and in April is going to pull down both exports and imports pretty dramatically.”
Shipping faces challenges from the coronavirus.
The coronavirus-driven lockdowns worldwide have strongly affected transportation for trade. Hundreds of cargo ship sailings from China have been canceled since late March, which hurts global trade. According to a BBC’s report, there have been 1.6 million seafarers who are on 50,000 tankers and cargo carriers, but many of them cannot leave the ships because of lockdowns.
A significant drop-off in imports is not a good sign.
It seems the Trump Administration’s dream has come true: in February the U.S. trade deficit in goods shrank to its lowest level in three years. But the drop in imports directly correlates with Americans’ decreased consumption. During such an economic shutdown, lower consumption is not good news, as it may hint of more job losses, lower incomes and even bankruptcies.
The coronavirus is threatening the trade deal signed by China and the U.S. in January.
The U.S. and China agreed in January to suspend their trade war, with China promising to buy $200 billion worth of U.S. products. But the coronavirus makes the trade deal shaky because China is likely to invoke a “in the event of a natural disaster or other unforeseeable event” clause to avoid holding to the deal. The G.O.P pinned its blame on China now for the massive and disruptive results caused by the coronavirus.
Trade will not improve until the global economy recovers from the pandemic.
The longer the pandemic continues, the weaker global trade, let alone the global economy, will be. Economists also don’t think the recovery will be like a V-shaped rebound and it may be slow. Social distancing and lockdowns won’t end until the coronavirus is under control. The March trade report is expected to be worse than February’s, economists said, and it is still not clear when the global economy will eventually recover.