In October, U.S. exports hit a record high, causing trade deficits with Europe and China to shrink to an unusually low point, according to a new report from the Bureau of Labor Statistics.
The report indicated that U.S. exports grew by $16.8 billion in October, while imports only grew by $2.5 billion, narrowing the trade deficit to its lowest point since last January, offsetting several alarming months of trade deficit growth in the summer and autumn.
The growth in exports was led by a $6.4 billion increase in exports of industrial supplies and materials, with significant growth in capital goods, food and beverages, consumer goods, and automotive parts and vehicles contributing to the increased numbers.
Altogether, the total decline in the trade gap constituted a 17.6 percent drop from September’s numbers.
This report is understood as a cause of optimism for economists, although it will be difficult to predict whether the trend will persist in the ensuing months. Recently, the Omicron variant of the CCP (Chinese Communist Party) virus has threatened to put a damper on international travel and trade in the short term,
“Early in the fourth quarter it looks like net exports are on track to add to GDP growth although the recent volatility in the monthly figures makes it hard to detect any underlying trend,” said JPMorgan economist Daniel Silver, as quoted by Reuters. “We continue to see upside risk to our 7.0% real GDP growth forecast for the fourth quarter.”
For the United States, the trade deficit with China is not only an economic but a geopolitical issue. Control of the flow of exports is a key feature of China’s soft power strategy, which uses the dependence of the global economy on Chinese goods to influence policymakers within foreign countries.
Insofar as the United States is able to mitigate its trade deficit with China, it will have greater leverage to assert its own interests against Chinese ambitions for regional hegemony.