Kiplinger Trade Outlook: Imports Rise Strongly in April

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The trade deficit widened sharply in April.
The U.S. trade deficit in goods and services rose to a seasonally adjusted $74.6 billion, from a downwardly revised $68.6 billion in March. This is the largest trade deficit since October 2022. 

The trade deficit is a measure of the difference between what the U.S. buys from foreign nations and what it sells overseas. The widening in the trade deficit from the previous month came amid a rise in exports and a stronger increase in imports. Imports of goods have grown 4.6% year-to-date, while exports have only risen 0.6%. The trade deficit has now widened in seven of the past eight months. While the trade deficit has improved since 2022, America’s appetite for imported goods may stay elevated, given resilient consumer spending in the U.S. 

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Exports rose modestly in April, up 0.8% from the previous month.
Most categories rose, with capital goods seeing the largest monthly gain, while consumer goods exports were also fairly strong. However, exports of services declined, with travel-related exports falling 1.7% to a three-month low. Exports have contended with a weaker global backdrop and a stronger dollar, which makes U.S. goods relatively more expensive abroad. 

Imports are rising as domestic demand continues to normalize.
Total imports rose 2.4% in April from the previous month, though imports of consumer goods fell 0.3% in April. Most types of consumer goods imports fell during the month, while medical, dental and pharmaceutical preparations posted a 12% surge on the heels of a strong gain the previous month. 

Imports of capital goods rose 3.1%, and imports of automotive vehicles jumped 10.4%. Durable goods orders have risen for three straight months, with computers and electrical equipment showing some strength. Computers and accessories together accounted for 67% of the gain in capital goods imports, corroborating the recent strength in durable goods orders. Imports of services fell $0.1 billion to $66.3 billion. The trade surplus in services fell to $24.7 billion in April. The recent strength in imports suggests domestic goods demand is normalizing after a relatively weak year for capital expenditures and durable goods consumption. 

Trade will weigh on GDP in the second quarter.
April’s data indicate that net exports will be a modest drag on GDP growth in the second quarter. This is primarily due to the continued strength in imports. Looking ahead, trade’s contribution to U.S. GDP growth will likely moderate in the first half of 2024, as weak economies across the world dampen the demand for U.S. exports. 

Source: Department of Commerce, Trade Data

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