(Bloomberg) -- The U.S. trade deficit narrowed in May to its smallest since October 2016 on a jump in exports of soybeans and aircraft amid the threat of retaliatory tariffs.
The gap decreased 6.6 percent to $43.1 billion, from a revised $46.1 billion in the prior month, Commerce Department data showed Friday. Exports of goods and services climbed to a record high, outpacing a pickup in imports.
The trade data will remain closely watched for signs of any fallout from what threatens to become a protracted trade war with China, Europe and Canada. At the same time, rising demand by U.S. households and businesses means purchases of foreign- made goods will probably remain resilient in coming months.
President Donald Trump has already imposed levies on imported steel, aluminum, solar panels and washing machines. Tariffs on $34 billion of Chinese goods took effect Friday at 12:01 a.m. in Washington, spurring retaliation from China.
The median estimate of economists surveyed by Bloomberg called for a May trade deficit of $43.6 billion.
The report also showed the trade gap with China, the world's second-biggest economy, widened to $32 billion in May from $30.8 billion.
Overall exports increased 1.9 percent to $215.3 billion as soybean shipments overseas almost doubled to $4.1 billion. Exports of civilian aircraft, a category that tends to be volatile, rose $1.9 billion in May.
Imports rose 0.4 percent to $258.4 billion, boosted by a record value of capital goods shipments from overseas.
Improvement in the trade gap may be a positive for second- quarter growth. Net exports subtracted 0.04 percentage point from gross domestic product growth of 2 percent over the January-to-March period, according to revised figures, while previous estimates had shown a modest contribution.
- After eliminating the influence of prices, which renders the numbers used to calculate GDP, the trade deficit shrank to $75.3 billion, the smallest since March 2017, from $77.5 billion in the prior month
- Exports and imports of goods accounts for about three-fourths of America’s total trade; the U.S. typically runs a deficit in merchandise trade and a surplus in services
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