US trade deficit hits lowest since 2009 as imports slump

The gap in goods and services shrank by 39% from the previous month to US$29.4 billion, according to Commerce Department data released on Thursday.

The figure came in below every forecast in a Bloomberg survey of economists.

The report arrived more than a month late due to the federal government shutdown.

Imports fell 3.2%, largely reflecting weaker inflows of medicines and nonmonetary gold.

Purchases of pharmaceutical preparations slid to the lowest level since July 2022.

Exports of all US goods and services rose 2.6% in October.

None of the figures is adjusted for inflation.

Companies had brought forward drug imports in September, apparently ahead of President Donald Trump’s planned 100% tariff on pharmaceutical imports from October 1, a measure that was later postponed.

Many firms avoided the duty after reaching arrangements with the administration in exchange for pledges to cut drug prices.

Trade has swung sharply month to month this year as the US rolled out tariffs.

In recent months, flows of nonmonetary gold and pharmaceutical preparations have surged and fallen in response to Trump’s shifting tariff signals.

Beyond gold, imports of industrial supplies and materials, including oil and metals, also declined.

At the same time, inbound shipments of computers and accessories increased, pointing to “genuine signs of strength elsewhere in the economy amid the AI buildout,” Bradley Saunders, a North America economist at Capital Economics, wrote in a note.

Separate government data showed labour productivity accelerated in the third quarter to the fastest pace in two years, a trend that could strengthen further as companies step up investment in artificial intelligence.

The volatility has also fed into measures of overall economic activity.

After the trade figures, the Federal Reserve Bank of Atlanta’s GDPNow model indicated net exports could add almost 2 percentage points to fourth-quarter growth, lifting its estimate to 5.4%.

Gold trade, unless used for industrial purposes such as jewellery production, is excluded from the government’s GDP calculations.

In inflation-adjusted terms, which feed into real GDP, the merchandise trade deficit narrowed to US$63 billion in October, the smallest since February 2020.

Volatile categories distorted October’s headline balance, but the underlying report still suggested trade likely supported US growth at the start of the fourth quarter despite the shutdown, an analyst wrote.

The goods-trade deficit with Ireland also tightened sharply.

Many major US drugmakers, including Eli Lilly & Co. and Pfizer Inc., have shifted much of their manufacturing to Ireland, attracted by its tax advantages.

Deficits with Mexico and China widened, while the shortfall with Canada narrowed.

The gap with Taiwan grew, likely linked to stronger imports of computers and related equipment.

Canada’s merchandise trade balance returned to deficit as a jump in imports of computers and electronics outweighed a rise in gold exports to non-US destinations, according to Statistics Canada data released on Thursday.

The figures also showed the share of Canada’s exports going to the US fell to 67.3%, the lowest reading in data going back to 1997, excluding the pandemic period.

Bloomberg