March 8, 2023

The trade deficit widened by $1.1 billion in January to $68.3 billion after widening by $6.6 billion in December. While volatile on a monthly basis, the deficit has narrowed dramatically since April of last year because exports have been essentially unchanged while imports have declined sharply. That suggests that the U.S. economy may be slowing in response to the higher interest rates caused by the Fed’s tightening which began in March of last year.

Exports rose $8.5 billion or  3.4% in January after having declined 1.2% in December.  It had been in a steady uptrend since the recession ended in April of 2020 as the global economy recovered, but it has flattened out in recent months.  In the past year exports have risen 13.3%.

Imports rose $9.6 billion in January to $325.8 billion or 3.0% after rising by 1.1% in December.  In the past year imports have risen 3.5%.  The drop in imports in the past several months has been entirely in the goods category.  Imports of services were essentially unchanged.

The best gauge of global trade flows is the change in the total of both exports and imports.  It had been rising steadily for the first two years of the expansion, but then leveled off at the beginning of this year,  Perhaps that mirrors what has been happening in the global economy –growth rebounding after the 2020 recession, but leveling off at a slower pace in the past year or so.

The trade deficit in real terms widened by $3.5 billion in January to $101.8 billion after having widened by $2.1 billion in December.  The deficit in real terms is important because that is what goes into the GDP calculation.  The trade component added 0.5% to GDP growth in the fourth quarter and looks like it will be roughly unchanged in the first quarter.

Stephen Slifer


Charleston, SC