US trade deficit falls 15% as Americans buy less from China

The monthly US trade deficit fell by nearly 15% in January, thanks largely to a shift with China as the two countries continue to negotiate a new trade agreement.

The US trade deficit in goods and services fell to $51.1 billion, down $8.8 billion compared to December, the Census Bureau reported Wednesday.

The gap also narrowed compared to the year before. It decreased by $1.9 billion, or 3.7%, from January 2018.

Most of the increase can be explained by a 14% drop in the trade deficit in China, America’s largest trading partner. In part, that’s due to US importers pulling back after rushing to buy Chinese goods ahead of possible tariff increases. President Donald Trump had threatened to raise the duty rate in March, but it never materialized.

The January data also shows a rise in soybean purchases from China. Beijing had stopped buying soybeans from American farmers last year in retaliation to Trump’s tariffs. But the Chinese bought $1.2 billion of soybeans in January, up from just $299 million during the previous month, the Census report said.

The US trade deficit is pulling back from the widest level seen in a decade. It hit a record high in December and has grown by more than $100 billion since Trump took office.

The President has made it a priority to shrink the trade deficit, which he uses as a measure of whether the United States is winning or losing on trade. He’s argued that bad trade deals have allowed other countries to take advantage of the United States.

Last year, he imposed tariffs on $250 billion of Chinese goods. The duties were meant to pressure Beijing to come to the negotiating table by encouraging Americans to buy less from China.

But there are other factors that affect the country’s trade deficit besides tariffs. Last year’s federal tax cuts have put more money back into Americans’ pockets, lifting demand for imports even if they’re more expensive. Meanwhile, slowing global growth and a strong dollar could be a drag on exports.