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The US trade deficit narrowed last year by the most since 2009.
The deficit went down because of a sharp downturn in imports of consumer and investment goods, coupled with an increase in spending toward services and experiences.
- Why it matters: While a downturn in goods purchases could be a sign of weakening demand in the US, it could also represent a return to normal after the spending surge during the pandemic.
By the numbers: According to data from the US Commerce Department, the overall trade gap shrank nearly 19% to $773.4 billion from a record $951.2 billion in 2022.
- US imports fell 3.6%, driven by declines in cellphones, semiconductor, and general goods purchases.
- On the other hand, exports rose 1.2% thanks to rising petroleum and motor vehicle sales.
- Bucking the trend, US agricultural exports fell to a three-year low as China slowed purchases.
The big picture: The US is undergoing a structural change in its trading patterns, with the nation trying to become more self-sufficient following souring relations with China.
In 2023, the US’s deficit with China shrank by 27% to $280 billion. Simultaneously, the US’s trade with Mexico grew to a record $152.4 billion, which saw Mexico overtake China to become the US’s largest trading partner last year.
The bottom line: This ‘nerashoring’ trend is set to continue into 2024 as Amercian companies rethink their supply chains to mitigate geopolitical risks.
