- The U.S. trade deficit widened to $44.4 billion in March, up from $39.8 billion in February, in line with market expectations.
- Both exports and imports of goods saw heavy contractions in March. Exports declined by 6.5% month-on-month, while imports fell by 2.1%. The drop in exports was broad-based across all product categories. Automotive exports saw the steepest decline (-17.9%), the biggest fall since the Great Recession. Accounting for price effects, real goods exports decreased by 5.1% in March, again the largest drop since 2009.
- With the decline in March, imports extended the trend to three consecutive months. Automotive and consumer good imports drove the decline, falling by 9% and 7.8% respectively. This was offset in part by increases in food, feed, and beverages imports (+3.5%) and capital goods (+2.9%). Excluding price effects, real imports fell by -0.6% in March.
- There were also big declines in services trade. Exports of services dropped by 15.3% for the month, while imports plummeted by 21.8%. Both of these were the biggest contractions on record. Driving the declines were nose-dives in travel and transport services, the categories most affected by COVID-19.
Key Implications
- As expected, international trade declined in March due to COVID-19 related disruptions. Factory closures across the world wreaked havoc on supply chains, resulting in both export and import contractions. The weakness was especially noticeable in automotive exports and imports, which reflects production stoppages that began in the third week of March. With production yet to restart, we could see an even greater decline in automotive exports and imports in April data.
- Indeed, April will likely be no better for international trade, but we may start seeing improvements in May as states begin to reopen their economies. However, with social distancing measures reducing the operating capacity of businesses, and tourists still wary of travel, trade will recover very gradually in the months ahead.
