GoldPrice.

The US trade deficit fell more than expected, dipping from -$59.8 billion to -$51.15 billion vs just -$57.5 billion expected. The 16.6% drop in the deficit is the sharpest drop since March 2018.

Key Takeaways

• The $8 billion trade deficit drop is far more extreme than anticipated and comes in the midst of crucial trade negotiations with China.
• Exports have recovered from the major slowdown seen in late 2018 as a result of the trade war and general global economic headwinds.

The Commerce Department reported on Wednesday that the deficit in trade saw a major reduction in January, over $6 billion more than forecast. The figures indicate unexpectedly positive trade activity in the midst of a brutal trade war which has impacted international industries.

Exports rose to $207.3 billion, up $1.9 billion from the month before. Imports dropped to $258.5 billion, down $6.8 billion. The deficit in goods fell to -$73.3 billion, a 10% reduction. The surplus in the services industry showed continued strong performance as it ticked upward to $22.1 billion.

US Trade Balance #deficit #us #spx #usd pic.twitter.com/cCZymmPyGj

— justme83 (@justme836) March 27, 2019

Trade War

The trade war with China was, of course, responsible for a large portion of the drop in trade over the last year as the US and China exchanged blows in the forms of punitive tariffs. The tariffs made goods from each nation significantly more expensive for import, creating a difficult environment for manufacturers and producers.

Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer are to commence further negotiations with Beijing officials on Thursday in an attempt to find a solution to the conflict, which is partially rooted in the Chinese practice of stealing US intellectual property and undercutting the US on the global marketplace. Lighthizer has stated that a deal may not take place at all depending on the level of cooperation from China.

In 2018, the US imposed tariffs on $250 billion worth of imports from China, resulting in China placing tariffs on $110 billion worth of US products.

International Trade

Canada’s trade balance saw a positive shift from a -$700 million deficit to a $1.4 billion surplus. In Switzerland and New Zealand, the trade balance saw a positive increase also, while South Korea’s deficit increased from $1.7 billion to $2.4 billion.

Soybean exports rose by $900 million, passenger cars rose by $700 million, and the volatile component of aircraft dropped by $1.3 billion.

Market Reaction

Gold has ticked downward following the positive news in trade which may be bullish for the USD and, as such, bearish for gold. Gold last traded at $1,316.67/oz, down -0.40% with a high of $1,138.96/oz and a low of $1,313.41/oz.

The precious metal may also simply be feeling the effects of yesterday’s selloff following the four-week high reached on Monday, a situation in which a profit-taking pullback is often to be expected.