Kiplinger Trade Outlook: The U.S. Trade Gap Rose in December

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The trade deficit widened slightly at the end of 2023, reaching a seasonally adjusted $62.2 billion in December from a downwardly revised $61.9 billion in November. The trade deficit is a measure of the difference between what the United States buys from foreign nations and what it sells overseas and includes both goods and services. As has been the case since the pandemic struck, trade flows were volatile in 2023, but the deficit has recently stabilized at close to $60 billion per month. The trade deficit fell 19% from 2022 — the largest annual drop since 2009. Total exports increased 1.2%, while imports fell 3.6% for the whole year.

The outlook for exports remains weak for 2024, on the back of cooling demand overseas. Total exports rose 1.5% in December. The rise was fairly broad-based, although it included relatively large gains in the volatile pharmaceuticals category. Exports of services also grew broadly, lifted by travel, transport and financial services. With most of the country’s major trading partners struggling to generate much economic growth, and with a resilient U.S. dollar keeping the cost of U.S. products relatively high for foreign buyers, it’s going to be hard for American exporters to boost sales abroad by much.

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An increase in inbound goods shipments led to a 1.3% rise in total imports in December. Imports of consumer goods rose by a larger 5.5%, with the biggest increases in the categories of pharmaceutical preparations, cell phones and household goods. Imports of industrial supplies rose 2.2%, but capital goods declined 0.6% and autos fell 1%. Imports of services rose 0.8% amid a rise in freight transport. Travel services declined. The trade surplus in services in December rose to a record $26.9 billion. A pullback in domestic consumer discretionary purchases and continued stagnation in manufacturing activity suggest weakness in imports will continue in early 2024.

Trade’s net contribution to GDP growth in the fourth quarter will likely be modest. The weaker performance of exports over the fourth quarter indicates that trade will likely provide a positive, albeit limited, contribution. Looking ahead, trade’s contribution to GDP growth will likely further moderate in 2024 as global economic growth weakens. 

Source: Department of Commerce, Trade Data

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