Ahead of the Bell: US Trade Gap

US trade gap expected to narrow sharply in April after big March surge

Associated Press
US trade deficit drops sharply in April
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FILE- In this Oct. 8, 2014, file photo, ship to shore cranes load shipping containers onto jockey trucks from a cargo ship at the Port of Savannah in Savannah, Ga. The Commerce Department reports on the U.S. trade gap for April 2015 on Wednesday, June 3, 2015. (AP Photo/Stephen B. Morton, File)

WASHINGTON (AP) -- The Commerce Department reports on April's U.S. trade gap at 8:30 a.m. Eastern Wednesday.

LOWER DEFICIT: The expectation is that the deficit declined to $43.6 billion, according to a survey of economists by data firm FactSet.

MARCH SURGE: The trade deficit jumped to $51.4 billion in March, the highest level in more than six years.

Economists believe that a flood of imports, which had been bottlenecked by a labor dispute at West Coast ports, rushed into the country when the impasse ended mid-month, obscuring a small increase in exports for the U.S.

The return to normalcy should lead to a narrowed deficit in April.

The overall economy contracted at an annual rate of 0.7 percent in the January-March quarter, the government reported last week, after growing at a 2.2 percent rate in the fourth quarter. Much of the weakness reflected the widening trade deficit, which cut nearly 2 percentage points from U.S. growth in the first quarter. In addition to the port dispute, a strong dollar worsened the trade deficit because it's made U.S. goods more expensive overseas while making imports cheaper.

On top of the deficit, the economy ran in to some headwinds, literally, as severe winter weather slowed economic activity. There was also a sharp cutback in capital expenditures by U.S. energy companies as the price of oil plunged.

But economists are looking for growth to recover in the current quarter, expecting the overall economy, as measured by the gross domestic product, to expand at a rate of around 2.5 percent, helped by healthy job gains. New jobs should boost spending by Americans while some of the adverse effects that held back growth at the beginning of the year fade in the April-June period.

President Barack Obama is lobbying Congress for the power to negotiate major trade agreements under expedited procedures that would require an up or down vote without amendments by lawmakers. The 12-nation Trans-Pacific trade deal would include countries like Chile, Vietnam and Japan.

Obama and backers of the trade deal argue that it would open huge markets to U.S. goods by lowering tariffs and other trade barriers. But critics, including labor and environmental groups, say that the trade agreement would subject American workers to unfair competition from countries with lower standards for both labor rights and environmental protections.

The Senate has approved the fast-track proposal but it faces heavy Democratic opposition in the House.

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