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Higher interest rates impact trade as imports and exports take an unexpected downturn, signaling potential shifts in the economic landscape.
The U.S. trade deficit unexpectedly narrowed in November as both imports and exports experienced declines, signaling the impact of higher interest rates on the nation’s economic landscape, according to a report released by the Commerce Department on Tuesday.
Contrary to analysts’ expectations of a slight widening of the trade deficit, the gap decreased to $63.2 billion, down from the revised October figure of $64.5 billion. The unexpected resilience in U.S. consumption has played a role in supporting trade, but the looming effect of higher interest rates, which tends to weigh on demand, has added pressure on imports.
In November, U.S. exports saw a decline of $4.8 billion, totaling $253.7 billion, while imports experienced a steeper drop of $6.1 billion, reaching $316.9 billion. The decrease in exports was attributed to a $3.6 billion fall in goods, including industrial supplies and materials such as crude oil and nonmonetary gold.
U.S. trade deficit tumbled 11.5 percent in November to less than $50 billion — the lowest level since June — while the politically sensitive trade gap with China for goods fell 7.3 percent, to $35.4 billion https://t.co/NkKGErVL38 pic.twitter.com/tgoYbwvNo2
— CBS News (@CBSNews) February 6, 2019
Imports of goods also saw a decline, particularly in consumer goods such as cell phones and pharmaceutical preparations. The U.S. goods deficit with China narrowed by $2.4 billion to $21.5 billion in November, as reported by the Commerce Department.
Rubeela Farooqi, Chief U.S. Economist at High Frequency Economics, noted that the trade deficit has, on average, been wider in the fourth quarter compared to the third. She commented on the outlook, stating, “The trajectory for demand and growth should slow, both domestically and abroad, indicating a likely moderation in trade flows going forward.”
