With Biggest Drop in Exports Ever, Will Narrow in Near Term

The U.S. trade deficit widened to $44.4 billion in March, from $39.8 billion in February. Both exports and imports fell over the month as the coronavirus pandemic disrupted global supply chains and the ensuing U.S. and global recessions have reduced demand both at home and abroad. 

Exports fell 10 percent over the month to $187.7 billion, the largest drop on record, going back to 1992. Imports fell 6 percent to $232.2 billion; this was the fourth-largest monthly decline, after three months during the Great Recession in 2008 and 2009. 

The Viral Recession is disrupting trade in two ways. First, the pandemic has disrupted global supply chains. Some manufacturers have stopped or reduced production, weighing on both exports and imports. At the same time demand has plummeted both in the U.S. and overseas as consumers around the globe have cut back on their purchases because of social distancing and reduced incomes. At the same time businesses have reduced their purchases from abroad. 

The U.S. trade deficit is likely to narrow in the near term. Both exports and imports will decline, but imports will fall more. During recessions the U.S. has historically seen imports decline; that will be especially true during the Viral Recession as consumers cut back on all sorts of purchases, including those from abroad. The data will be volatile, as restrictions on movement vary across countries, disrupting trade flows.