Proving once again that it may be awhile before the country’s ports get back to normal after a lengthy contract dispute, import and export activity in the United States dwindled significantly in February, evidenced by a plunging trade deficit.
The U.S. trade deficit fell 17 percent in February.
According to the U.S. Department of Commerce, the nation’s trade gap fell nearly 17 percent in February, totaling $35.4 billion. That’s down from approximately $43 billion in January. Experts attribute the slowdown to several factors, including a weak resumption of port activity along the West Coast, after the Pacific Maritime Association (PMA) and International Longshore and Warehouse Union (ILWU) finally settled their contract dispute earlier this year. Additionally, low oil prices have cut into profits for producers, much of which stems from there being a glut of supply in the global market.
More than anything else, though, the dip in trade activity stems from the disruptions along the West Coast’s more than two dozen ports, noted Thomas Costerg, an economist at Standard Chartered Bank in New York. The good news, however, is that it won’t last long, as slowly but surely, companies are collecting their shipments that had gone unretrieved because of the spate between ILWU and PMA.
“Looking ahead, the trade deficit should widen again,” said Costerg, according to Bloomberg.
He added that while fuel imports will likely remain slow for the foreseeable future, the combination of strengthening domestic demand – evidenced by improved consumer sentiment – and the rising value of the dollar will help buoy consumer product-related imports.
The $35 billion trade deficit wasn’t exactly what economists had predicted for February. In a survey of 70 financial experts, the median forecast was a gap of roughly $41 billion, Bloomberg reported.
Imports from Japan trailed off in February, largely because of the strengthening value of the dollar.Imports from Japan weak
As for where trade activity slowed the most, shipments from Asia trailed off substantially. Imports from Japan in February were at their weakest point in nearly four years, Bloomberg noted from the Commerce Department report.
Regarding exports, which also eased in February, the strengthening U.S. dollar is believed to be a key factor for the slowdown. The Associated Press noted that based on an assessment from the Institute for Supply Management, the value of the dollar has caused factories to re-evaluate their expansion efforts. Meanwhile, foreign countries have scaled back their purchases of U.S. made products because prices have risen. The total value of exports reached $186.2 billion, a two-and-a-half year low.
The U.S. Commerce Department is optimistic that trade will get back on track in the months ahead, which could be aided by the passage of trade promotion legislation for the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TATIP).
Penny Pritzker, commerce department secretary, recently discussed this at a forum held in Tampa, Florida, advocating for why Congress should pass a bill.
“Our push for trade promotion legislation … is about providing American businesses with a fair opportunity to sell their goods and services to consumers across the Asia Pacific and in Europe – today, tomorrow, and long into the future,” said Pritzker.