WASHINGTON: The US trade deficit swelled in January to its highest level in nearly a decade as oil prices rose and the world's biggest economy sold fewer aircraft, government data showed Wednesday.
The news comes amid White House furor over trade policy, with President Donald Trump's top economic advisor Gary Cohn announcing his resignation late Tuesday after losing a bruising internal battle over whether to impose punishing tariffs on steel and aluminum.
Cohn's resignation and the fear Trump will press ahead with restraints on trade have roiled global markets in recent days, although the White House on Wednesday significantly modified its position, saying Trump could allow "carve outs" for Canada and Mexico.
Wall Street opened lower Wednesday but the major indices steadily pared losses over the afternoon for a mixed close, leaving the Dow Jones Industrial Average 0.3 percent lower.
In the first month of the year, the US trade gap rose five percent over an upward-revised December to $56.6 billion, its highest level since October of 2008, overshooting analyst expectations for only a two percent increase, according to the Commerce Department. This put January up 16.2 percent over January of 2017, with exports trailing imports.
The figures also put trade on track to subtract from GDP growth in the first quarter. They also follow official reporting last month showing Trump's first year in office had the highest trade gap since the start of the global crisis in 2008.
Trade war fears
With global investors rattled following Cohn's departure, Trump cabinet members appeared on television to make the president's case. Commerce Secretary Wilbur Ross told CNBC the US was not "looking for a trade war."
"We're going to have sensible relations with our allies," he said.
While economists say a growing trade deficit can be a sign of economic recovery, with strong consumer demand outstripping domestic supply, Trump has attributed them to "cheating" by US trade partners which he claims has hollowed out US industry.
Wednesday's Commerce Department figures showed January exports fell 1.3 percent to $200.9 billion, the largest decrease in 16 months, as aircraft exports decreased in value by $1.8 billion and international sales of industrial supplies like crude oil and other chemicals fell by $1.3 billion.
Imports were unchanged at $257.5 billion, which is still five percent over their level in January of 2017.
Analysts cautioned Wednesday against reading too much into volatile, month-to-month figures. Ian Shepherdson of Pantheon Macroeconomics said oil prices broadly explained the January jump.
"This is noise," he said in a client note. "The trend is falling as US oil production rises."
Excluding volatile oil data, the deficit actually fell by $1.9 billion, he added.
US exports of services, including charges for the use of intellectual property, were the highest on record at $66.7 billion, according to the Commerce Department.
But the goods deficit with Canada reached its highest level in three years at $4.1 billion for the month.
Canada is the largest foreign US supplier of steel and has strenuously objected to the tariffs, which Trump has tied to pending efforts to renegotiate the North American Free Trade Agreement.
With China, the goods deficit rose 16.7 percent to its highest level in more than two years at $36.3 billion.
But the trade gap with the European Union, which Trump has accused of unfairly blocking US exports, narrowed in January, falling 13.9 percent for the month.
The deficit with Germany fell 7.5 percent to $5.4 billion while the surplus with the Britain doubled to $200 million.