US Trade Deficit Hits Record as Asian Imports Spike in March

Economic

Summary:

Companies rushed to stockpile foreign products ahead of April's 'Liberation Day'

U.S. imports of goods from China slowed in March while American businesses accelerated efforts to import goods from other Asian countries ahead of U.S. President Donald Trump's sweeping tariffs, resulting in the largest trade deficit on record and hampering economic growth in the first quarter.

The U.S. trade deficit in goods for March rose 11.2% from the prior month to a record $163.5 billion, driven by imports of consumer products. Imports from China dropped 7% to $29.4 billion, the Commerce Department's Bureau of Economic Analysis reports.

Washington's trade deficit with China shrank 15% to $17.9 billion, as companies paused orders after Trump hiked the duty rate on all Chinese imports to 20% on March 4. But some businesses continued to front-load shipments such as car parts and consumer electronics from China, given the unpredictability in the Trump administration's trade policy.

"The additional 20% tariff on imports from China in place in March began to bite, with the share of imports from China falling to its lowest point in 25 years," said Matthew Martin, senior U.S. economist at Oxford Economics. "Even with exemptions, the average tariff rate rose to over 100% in April, which will push China's share of total imports sharply lower."

March imports from Vietnam rose 23% to $14.8 billion while Indian imports climbed 34% to $11.2 billion compared with the previous month, both record highs. Rising shipments from Vietnam resulted in a record $13.5 billion deficit, up 24% from February. Imports from Thailand rose 46% to $7 billion.

Trump's 25% tariffs on goods from Canada and Mexico also took effect in March, but items that fell under the rules of the free trade agreement among the three countries were then made exempt.

U.S. duties on steel and aluminum also kicked in that month. Imports from Mexico hit an all-time high of $48 billion in March, resulting in the largest trade deficit since the census bureau began tracking.

Importers also rushed orders in anticipation of Trump's April 2 "Liberation Day" announcement of baseline tariffs of 10% on all trading partners and additional "reciprocal" duties as high as 84%. The president has accused American trading partners of treating the U.S. unfairly and wants countries to buy more U.S. products.

But the White House paused the reciprocal tariffs, giving foreign governments a deadline of July 9 to negotiate trade deals.

The Port of Los Angeles processed 778,406 twenty-foot equivalent units (TEUs) in March, up 4.7% on the year. One TEU refers to the size of a typical shipping container. Port of Los Angeles Executive Director Gene Seroka described the period as the busiest start of the year in the port's 117-year history.

Goods imports soared 5.4% to a record $346.8 billion, the Commerce Department reports. The rush of goods imported by companies in a bid to avoid higher tariffs has weighed on the U.S. economy, which contracted in the first three months of the year. Gross domestic product decreased, for the first time since 2022, at an annual rate of 0.3% last quarter.

Economists are warning of recession risks, and the uncertainty has paralyzed business investment. It is likely that trade with Asian countries will taper off as governments try to negotiate trade deals with the Trump administration.

"ASEAN's exports to the U.S. are likely to reset lower as tariffs take hold," Priyanka Kishore, founder of consultancy Asia Decoded, told Nikkei Asia, referring to the bloc of Southeast Asian countries.

"Even with trade deals, a base tariff rate of 10% looks likely, with potentially additional sectoral tariffs," she added. "That will likely impact U.S. demand for overseas products unless costs are completely absorbed by exporters or redistributed to other regions of the world to avoid hitting the U.S. consumer at once with large price hikes."

Since rolling out the 20% tariffs on Chinese goods in March, Trump has raised the duties even further, slapping a total of 145% tariffs on imports from the world's second largest economy.

Trump's trade war with China has caused shipping disruptions at levels not seen since the COVID-19 pandemic, while trade between the two countries is expected to come to a halt. Export orders and manufacturing activity fell in April, according to China's National Bureau of Statistics. The 145% duty rate on all Chinese imports is piling pressure on Chinese manufacturers and could lead to layoffs in factories across the country.

China has responded to Trump's trade restrictions with its own 125% tariffs on U.S. imports, as well as restrictions on the export of critical minerals used in batteries. Beijing has said it would "never kneel down" before Washington but said it is open to discussions.

Source: NikkeiAsia

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Adam

Commodity

The natural gas market looks like it is getting heavy again, as the recent rally will bring in sellers at a crucial point. The market continues to focus on the idea of temperatures in the US rising, and a potential recession, driving down the demand for electricity created.

Natural Gas Technical Analysis

The natural gas market initially tried to rally early on Tuesday, but it seems like the market is struggling with the 50-day EMA and this major area of confluence. The uptrend line from previous trading now offers resistance right along with the 50-day EMA. And we also have to look at this through the prism of the 38.2% Fibonacci retracement level being major resistance as well. This is an area that I have seen important in several times in the past as well.

So, with that and the fact that this is a cyclically negative market, I think it makes a lot of sense for natural gas to continue dropping. The $3.50 level right around the 200-day EMA offers the initial potential support and target. But if we break down below there, it wouldn’t surprise me at all to see natural gas drop down to the $3 level, an area that has been important more than once.

Ultimately, this is a market that also has a lack of heating demand coming into the picture and of course, possibly a recession, which will drive down demand for electricity production. So, these are things that work against natural gas over the longer term anyway. So, with this being said, I like the idea of assuring this market, but I recognize natural gas is an extraordinarily volatile market. So, you must be careful with it, as it can damage your account quickly if you are too levered.

Source: fxempire

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Catherine Richards

Economic

The U.S. trade deficit widened to a record high in March as businesses boosted imports of goods ahead of President Donald Trump's sweeping tariffs, which dragged gross domestic product into negative territory in the first quarter for the first time in three years.

While reciprocal tariffs with most of the United States' trade partners were suspended for 90 days, duties on Chinese goods came into effect in early April, triggering a trade war with Beijing.

"Businesses are clearly scrambling as they try to find a way through this time of unprecedented change, but the worst is undoubtedly yet to come because the import tariff collections did not start to roll in earnest until after the White House Liberation Day announcement on April 2," said Christopher Rupkey, chief economist at FWDBONDS. "There are still no trade deals announced in Trump 2.0."

The trade gap jumped 14.0%, or $17.3 billion, to a record $140.5 billion, the Commerce Department's Bureau of Economic Analysis (BEA) said on Tuesday. Economists polled by Reuters had forecast the trade deficit rising to $137.0 billion.

Imports vaulted 4.4% to an all-time high $419.0 billion in March. Goods imports soared 5.4% to a record $346.8 billion. They were boosted by a $22.5 billion jump in consumer goods to an all-time high, mostly pharmaceutical preparations.

Capital goods imports increased $3.7 billion to a record high, reflecting a solid rise in computer accessories. Imports of automotive vehicles, parts and engines increased $2.6 billion, driven by passenger cars.

But imports of industrial supplies declined $10.7 billion amid decreases in finished metal shapes and nonmonetary gold, which had accounted for the surge in the prior two months. Crude oil imports fell $1.2 billion.

Monthly US Trade Balance

Exports climbed 0.2% to $278.5 billion, also a record high. Exports of goods increased 0.7% to $183.2 billion, the highest since July 2022, lifted by industrial supplies and materials, which advanced $2.2 billion amid rises in natural gas and nonmonetary gold.

Automotive vehicles, parts and engines exports increased $1.2 billion. But exports of capital goods decreased $1.5 billion, weighed down by a $1.8 billion decline in shipments of civilian aircraft. The goods trade deficit ballooned 11.2% to a record $163.5 billion in March.

The government reported last week that the trade deficit cut a record 4.83 percentage points from GDP last quarter, resulting in the economy contracting at a 0.3% annualized rate, the first decline since the first quarter of 2022.

Trump sees the tariffs as a tool to raise revenue to offset his promised tax cuts and to revive a long-declining U.S. industrial base. Economists expect the flood of imports to ebb by May, which could help GDP to rebound in the second quarter.

They, however, caution that the lift from subsiding imports could be offset by a drop in exports as other nations boycott American goods and travel. There has been a decrease in visitors to the U.S., especially from Canada, in protest over the punitive tariffs as well as an immigration crackdown and Trump's musings about annexing Canada and Greenland.

Indeed, exports of services fell $0.9 billion to $95.2 billion in March, pulled down by a $1.3 billion drop in travel.

The rush to beat tariffs saw imports from Mexico, the United Kingdom, Ireland, the Netherlands, Belgium, France, Germany, Italy, India and Vietnam hitting all-time highs. But imports from China were the lowest since March 2020, when the world was grappling with the first wave of the COVID-19 pandemic.

The seasonally adjusted goods trade deficit with China narrowed to $24.8 billion from $26.6 billion in February. The trade deficit with Canada also declined to $4.9 billion from $7.4 billion in February. The trade gap with Mexico was little changed, while the surplus with the United Kingdom narrowed.

Source: Reuters

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Warren Takunda

Stocks

Wall Street's main indexes fell on Tuesday after U.S. President Donald Trump's latest plans for pharma tariffs renewed worries of the impact of a trade war, while some downbeat corporate results also weighed on investor sentiment.

Trump said late on Monday that he would announce pharma tariffs over the next two weeks, his latest action on levies that have roiled global financial markets over the past months.

Eli Lilly and Merck slipped about 2.4% each, while Pfizer was down 1.7% after the news, which offset optimism around Trump's order aimed at reducing the approval time for pharmaceutical manufacturing plants.

Tariff-driven uncertainty has led consumers, businesses and even the U.S. Federal Reserve to adopt a wait-and-watch mode as they struggle to navigate the tariffs and gauge their impact.

Ford Motor was the latest to suspend its annual outlook on Monday, joining a host of companies that withdrew their forecasts in April. The carmaker's shares reversed premarket losses and were last up about 1% in choppy trading.

"The biggest thing that stands out (this earnings season) is that CEOs are concerned about the uncertainty that's coming out (of) Washington, D.C. with respect to global trade," said Adam Sarhan, chief executive of 50 Park Investments.

At 09:55 a.m. ET the Dow Jones Industrial Average fell 435.80 points, or 1.06%, to 40,783.03, the S&P 500 lost 61.98 points, or 1.10%, to 5,588.40, and the Nasdaq Composite lost 240.21 points, or 1.35%, to 17,604.03.

Most S&P 500 sectors were trading in the red, with healthcare and info tech the biggest losers, down 1.4% and 1.7%, respectively.

Data analytics firm Palantir's shares fell 13.5% to the bottom of the S&P 500 as investors were unimpressed by the company's modest revenue beat and in-line profit.

The Fed starts its two-day meeting on Tuesday, with the central bank widely expected to stay put on interest rates. Comments from policymakers will be scrutinized for any clues hinting at where they stand on monetary policy easing this year.

Tesla's new car sales in Britain and Germany plummeted to their lowest in over two years in April.

Traders see about 79 basis points of policy easing by the end of 2025, with the first cut coming in July, according to data compiled by LSEG.

The Trump administration suggested last week that potential deals with trading partners were underway, but markets have seen no concrete results on that front. Wall Street closed lower on Monday, with the benchmark S&P 500 snapping a nine-session winning streak.

Against the uncertain trade backdrop, businesses boosted imports of goods in March, pushing the country's trade deficit to a record high of $140.5 billion.

DoorDash was down 7.5% after the meal delivery firm said it would buy Deliveroo in a deal valuing the British rival at about 2.9 billion pounds ($3.86 billion). The U.S. firm's quarterly revenue missed estimates, disappointing investors.

Declining issues outnumbered advancers for a 3.03-to-1 ratio on the NYSE and a 3.31-to-1 ratio on the Nasdaq.

The S&P 500 posted three new 52-week highs and six new lows, while the Nasdaq Composite recorded nine new highs and 56 new lows.

Source: Reuters

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Adam

Economic

Central Bank

Most global markets remain in the red again today, taking a breather from their upward climb last week. Investors are on tenterhooks, eagerly anticipating what Fed Chair Jerome Powell will reveal tomorrow. The expectation is that US interest rates will remain steady. Corporate earnings are robust, yet the horizon is obscured by the looming uncertainty of the US-initiated trade war. In other words, it's business as usual in the financial world.

There was no tenth consecutive session of gains on Wall Street yesterday. The streak was broken by a modest 0.6% decline in the S&P 500, which coincided with quieter corporate earnings activity. However, the US Treasury Secretary delivered a confident speech, the kind that investors love. Scott Bessent said that US growth should return to 3% next year, driven by the combined effect of investment generated by tariffs, deregulation and tax cuts. Of the three pillars cited by Bessent, only the first has really been built. The financial markets are counting (very) heavily on the other two to fuel the positive narrative and continue their upward trend. But the task is not easy for the Trump administration, which has to contend with a huge deficit and a debt market that is much more demanding in terms of economic consistency than the stock market.

In Europe, indices have had mixed fortunes. Paris lost 0.55%, but Frankfurt, the European star of the year, gained more than 1%, extending its streak of consecutive gains to nine. London is still one step ahead with a record streak of 15 consecutive gains. The City, which was closed yesterday, could attempt to make it 16 today.

The strength of the stock indices contrasts with the anxiety of business leaders faced with the reshuffling of the international trade deck. Statistics show that companies are exceeding expectations in terms of relative data, but this has not prevented downward revisions of forecasts from piling up. Yesterday, Mattel, Ford and Clorox abandoned their targets, and several companies are starting to pay close attention to their balance sheets to avoid being caught in a downward spiral.

These liquidity problems are not affecting Berkshire Hathaway, which nevertheless lost 5% yesterday on Wall Street after the announcement of the retirement of finance guru Warren Buffett (94). I have skimmed through a lot of sensible articles on how Buffett's successor, Greg Abel, should allocate Berkshire Hathaway's $347.7 billion war chest. For educational purposes, and because it's fun to do so, let's find out what you can buy with $347.7 billion. Here are a few examples:

You can purchase one Elon Musk. Assuming his current wealth is $336 billion, as suggested by the Bloomberg billionaire ranking.

Eight, almost nine Glencore. The mining group's rough patch has caused its market capitalisation to plummet.

2,349 A321neo. The new star of Airbus is priced at $148 million (unofficial), although we know that airlines get generous discounts on the list price.

21,220 SL120 Asymmetric yachts. The mid-range model from the Sanlorenzo shipyard is a beautiful 36-metre baby. Not easy to park.

After this useless digression, let's return to the financial markets. Investors will adopt a wait-and-see approach ahead of the Fed's decision on interest rates tomorrow evening. The probability of the status quo remains at around 97% on the futures market. The rise in US bond yields proves that the market is pricing in a less accommodative US central bank than hoped for. In fact, traders are beginning to abandon hopes of a cut at the next meeting on 18 June: the probability has fallen to 27%, down from 60% a week ago. On the corporate front, several important results are expected today. In politics, Friedrich Merz failed to be appointed German chancellor today during the first round of vote, following the signing of the coalition agreement in Germany. Meanwhile, Mark Carney, the new Canadian prime minister and former head of the Canadian and British central banks, is scheduled to meet with Donald Trump at the White House.

In Asia-Pacific, public holidays continue to thin the ranks: Tokyo, Seoul and Shenzhen are closed. In Hong Kong, the Hang Seng is up 0.7%. Taiwan and Sydney ended flat. The Indian stock market is down 0.2%. European leading indices are bearish.

Source : marketscreener

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Damon

Economic

The report from the Commerce Department on Tuesday showed the nation imported a record amount of goods from 10 countries, including Mexico and Vietnam. Imports from China were, however, the lowest in five years and could drop further as Trump has hiked duties on Chinese goods to a staggering 145%.While reciprocal tariffs with most of the United States' trade partners were suspended for 90 days, duties on Chinese goods came into effect in early April, triggering a trade war with Beijing.

EXPORTS RISE MARGINALLY

Indeed, exports of services fell $0.9 billion to $95.2 billion in March, pulled down by a $1.3 billion drop in travel.

Source: Kitco

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Adam

Commodity

Gold futures prices are again strongly higher in early U.S. trading Tuesday, on continued solid safe-haven demand, especially from China. Silver prices are also sharply up. A weaker U.S. dollar index early this week is also bullish for the gold and silver markets. June gold was last up $59.10 at $3,381.40. May silver prices were last up $0.855 at $33.06.

A Dow Jones Newswires headline today reads: “Gold futures rally as market hopes fade for swift trade war resolution.”

Broker SP Angel today reports that according to Bloomberg the Shanghai Gold Exchange is planning to boost its warehouse network to Hong Kong, operated by the Bank of China. “The move is intended to promote yuan-denominated gold benchmarking as Beijing looks to exert more control over commodity pricing. The Shanghai gold exchange has seen record volumes in recent quarters as Chinese retail saw heavy buying.”

This week comes the Federal Reserve’s interest rate decision on Wednesday afternoon. No change in U.S. monetary policy is expected at this week’s FOMC meeting that begins Tuesday morning.

Asian and European stock markets were mixed in overnight trading. U.S. stock indexes are pointed to lower openings today in New York. Risk aversion is creeping back into the general marketplace amid no major breakthroughs announced on the global trade war front.

In other overnight news, Trade Nation’s David Morrison writes in a morning email dispatch: “The Japanese yen was stronger across the board, getting a modest safe-haven lift. There was more volatility during the overnight session after the Hong Kong Monetary Authority (the region’s de-facto central bank) intervened to weaken the Hong Kong dollar. It continues to butt up against the top of its trading band, thanks to the continued weakness in the U.S. dollar.”

The key outside markets today and see the U.S. dollar index weaker. Nymex crude oil futures prices are higher and trading around $58.50 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently at 4.343%.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook retail sales report, the U.S. international trade report, the RCM/TIPP economic optimism index, and the global services PMI.

Gold price sharply up on safe-haven demand as FOMC meeting begins_1

Technically, June gold futures bulls have the solid overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at the contract/record high of $3,509.90. Bears' next near-term downside price objective is pushing futures prices below solid technical support at last week’s low of $3,209.40. First resistance is seen at the overnight high of $3,395.00 and then at $3,400.00. First support is seen at $3,350.00 and then at the overnight low of $3,332.10. Wyckoff's Market Rating: 7.5.

Gold price sharply up on safe-haven demand as FOMC meeting begins_2

May silver futures bulls have the overall near-term technical advantage. Silver bulls' next upside price objective is closing prices above solid technical resistance at $33.69. The next downside price objective for the bears is closing prices below solid support at $31.00. First resistance is seen at $33.50 and then at $33.69. Next support is seen at $32.48 and then at $32.00. Wyckoff's Market Rating: 6.0.