Trade deficit unexpectedly narrows in January
President Obama on Thursday launched an effort to rebuild the nation’s long-term economic strength by sharply boosting exports, and he got a lift from government data showing that the trade deficit narrowed unexpectedly in January.
But the trade report also showed that, although imports declined, U.S. exports lost momentum as well, slipping for the first time since last spring.
The mixed signals pointed up just how great the challenge will be to meet the president’s goal of doubling exports in five years, which was last accomplished in the 1970s when global competition was less intense.
Obama stressed the urgency of the issue as he announced the creation of an Export Promotion Cabinet that would assign senior officials to undertake new responsibilities for enhancing and facilitating overseas sales.
“We have to rebuild our economy on a new, stronger, more balanced foundation for the future,” Obama said in prepared remarks for the Export-Import Bank’s annual conference in Washington. “Ninety-five percent of the world’s customers and the world’s fastest-growing markets are outside our borders. We need to compete for those customers because other nations are.”
Although he offered few details on the timing of specific actions, the president pledged to forge favorable trade agreements -- including long-stalled pacts with South Korea and Colombia -- and to crack down on unfair trading practices.
He said his administration was also working to overhaul the way the government restricts exports of certain U.S. products for security reasons. Defense Secretary Robert Gates will be outlining the proposed changes within the next couple of weeks, Obama said.
The president’s push to expand exports comes amid rising trade tensions as countries recovering from the worldwide recession renew their efforts to protect their share of global markets and to grow jobs through exports.
Trade relations with Mexico and Brazil have been strained over disputes involving trucking and U.S. cotton subsidies. And the nation’s large and long-running deficit with China is reemerging as a political lightning rod.
Touching on the sensitive issue of China’s currency policy, Obama repeated his call for Beijing to move “to a more market-oriented exchange rate [that] would make an essential contribution to that global rebalancing effort.”
The Chinese yuan is widely seen as significantly undervalued, giving Chinese exporters an extra pricing advantage in selling their goods overseas.
Obama first stated his goal of doubling exports in five years in his State of the Union address in January. Although many economists view the target as overly optimistic, manufacturers and some policy analysts welcomed the stepped-up efforts on trade -- an area that had been crowded out of the president’s agenda by healthcare and other issues.
Obama linked the push on trade to job creation, saying that doubling exports in five years would support 2 million jobs. “In a time when millions of Americans are out of work, boosting our exports is a short-term imperative,” he said.
But critics said the key was whether the trade deficit narrowed significantly.
“The problem is that because the level of imports is larger than exports, if both increase at roughly the same pace the trade deficit will widen again,” Paul Dales, an economist at Capital Economics, said in a note to clients Thursday.
And Thursday’s report from the Commerce Department showed that despite the improvement in January, the U.S. trade gap has generally been on the rise since hitting a recession low of $25.8 billion last May.
The January trade deficit declined to $37.3 billion from a revised $39.9 billion in December. Analysts on average were expecting a deficit of $41 billion. But the drop was due to an unexpectedly large falloff in imports of petroleum and automobiles.
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