International Trade: Steady Balance Amid Pandemic

Bottom Line: The trade balance widened as expected in June as both exports and imports increased modestly. Overall, following significant volatility in 2019 amid US-led trade negotiations with China, Europe, Canada, and Mexico, among other countries, the trade balance has shown remarkably low volatility amid the global pandemic. Both exports and imports contracted in March and April and then expanded in May and June, leaving the monthly balances averaging a deficit of about $52 Billion. The trends with Asian countries, especially China and Japan, shifted modestly towards a smaller trade deficit, while the trends with Europe, Canada, and Mexico, remain mostly towards wider deficits. Expect an uptick in volatility in the coming quarters, especially as China's demand for US agricultural products this Fall remains a question as hostility over the novel coronavirus threatens Phase One of the US/China trade agreement. The International Trade Deficit NARROWED by $4.1 billion to $50.7 billion in June, compared with market expectations for a decline to a $50.2 billion deficit. Exports ROSE by 9.4% to $158.3 billion after a decline of 4.3% in the prior month. The declines in food, feed, and beverages and were more than offset by increases in motor vehicles and parts and capital goods. Export growth is now 24.4% BELOW their year-ago level. Imports ROSE 4.743% to $208.9 billion after a decline of 0.7% in the prior month. The declines in industrial supplies and materials and other goods were more offset by increases in motor vehicles and parts and consumer goods. Imports are now 19.9% BELOW their year-ago level.