Bloomberg
Published Nov 27, 2019 07:00AM ET
Updated Nov 27, 2019 07:38AM ET
How the Trade War Is Reshaping the U.S. Economy’s Growth Picture
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The ongoing tariff war whipsawed companies again in October, with the U.S. merchandise trade deficit narrowing to the lowest level in more than a year. It was led by a drop in imports — particularly autos and consumer goods.
That brings good news and bad:
The U.S. added 15% tariffs Sept. 1 on $110 billion in Chinese imports, including popular purchases such as the Apple (NASDAQ:AAPL) watch, clothing and shoes. As a result, imports of the items from China dropped in September, and it appears as if that’s continued into October.
At the same time, the boost in inventories and a smaller trade gap should help prop up data on the economy’s health. Barclays (LON:BARC) increased its estimate for fourth-quarter gross domestic product growth to 1.6% and Amherst Pierpont Securities bumped its up to 2.7%. Macroeconomic Advisers increased their GDP tracker to 1.9% for the final three months of the year.
Even though it’s increasing numbers for year-end, the overall trend is still negative, according to Barclays. Total U.S. exports also declined in October, hitting the lowest level since the start of 2018.
“While a narrower trade deficit may mechanically add to GDP growth,” wrote economist Michael Gapen, “underneath that veneer is further evidence of a softening in activity.”
Charting the Trade War
The pressure U.S. Trade Representative Robert Lighthizer and the Trump administration are applying on the World Trade Organization may, in just a few weeks, render the Geneva-based arbiter of trade inoperative.
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