U.S. Trade Deficit Plunges 16.9 Percent In February

The U.S. trade deficit plunged in February as both imports and exports sank, driven by a since-settled trade dispute and a global economic slowdown that has cut into oil prices and caused the dollar to rise in value.

The U.S. trade deficit plunged in February as both imports and exports sank, driven by a since-settled trade dispute and a global economic slowdown that has cut into oil prices and caused the dollar to rise in value.

The Commerce Department said Thursday that the deficit plummeted 16.9 percent to $35.4 billion in February, down from $42.7 billion in January.

The sharp decrease reflects a $10.2 billion drop in imports since January, likely due to cheaper oil prices and a since-resolved West Coast ports dispute that interrupted the flow of 20 percent of the nation's imports. The dispute led to sharp declines in imported goods from China and Japan, causing the trade deficit with both countries to fall.

Exports also tumbled because a strengthening dollar has caused American-made goods to be more expensive abroad. The rising value of the dollar has curbed expansion at U.S. factories, according to an index released Wednesday the by Institute for Supply Management, a trade group of purchasing managers.

The trade deficit has fallen 3.2 percent compared to the same period last year. Economists expect the deficit to widen further in 2015, as a growing U.S. economy should fuel demand for imports while the stronger dollar reduces exports.

Imports account for roughly 16 percent of gross domestic product, while exports account for 13 percent of GDP, according to analysts at Bank of America. The resulting trade deficit — which totaled $505 billion last year — represents roughly 3 percent of GDP and causes a drag on overall growth.

The influence of the ports dispute was evident in the trade figures with China. Imported goods from China decreased $3.5 billion to $36.3 billion in February, a drop that may prove temporary based on historic patterns.

The politically sensitive deficit with China set another record high last year, surging 23.9 percent to $342.6 billion. That constant gap has created pressure on Congress and the Obama administration to take tougher actions against what critics see as China's unfair trade practices. U.S. manufacturers say that China is manipulating its currency to keep it artificially low against the dollar.

The domestic energy boom has kept the deficit in check. Not only has the U.S. reduced its dependence on foreign oil, but the falling prices have further limited the cash value of imported petroleum.

February petroleum imports totaled $16.3 billion, the lowest since September 2004.

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