US: Trade deficit hits new post-great recession high, likely to widen even further  - Wells Fargo

Analysts at Wells Fargo, point out that the US trade deficit hit in February the highest level since the financial crisis and they consider that it will probably widen even further in coming months.

Key Quotes: 

“The U.S. trade deficit widened even further in February, rising to yet another post-Great Recession high of $57.6 billion. The trade gap was higher than most analysts had expected. Although exports of goods and services were up by $3.5 billion during the month, imports jumped even more, rising by $4.4 billion.”

“The increase in exports in February may reflect, at least in part, some statistical payback for the sizeable decline that occurred during the previous month.”

“Indeed, with economic growth remaining solid in the rest of the world and with the trade-weighted value of the dollar down about 9 percent from its high in late 2016, U.S. export growth should remain resilient in coming months.”

“Solid growth in U.S. domestic demand in recent months continues to pull in imports, and we expect this dynamic to remain intact in coming months as well.”

“Net exports exerted a 1.2 percentage point drag on GDP growth in the fourth quarter of 2017, and it appears that the foreign sector continued to exert headwinds on U.S. GDP growth in the first quarter. Not only has the nominal trade deficit widened in recent months, but so too has the real trade deficit, which matters for real GDP growth.”

“Exports and imports should continue to trend higher in coming months. A potential fly in that ointment would be tariffs that the United States and China have threatened to levy on each other’s products in coming months. A full-blown trade war between the world’s two largest economies, should one develop, probably would not cause American exports and imports to go into reverse, but it could weaken growth in trade.”