US trade deficit shrinks on falling China imports

The US trade gap narrowed sharply in January largely due to a big drop in imports from China, and also helped by falling auto imports from Canada, the Commerce Department reported Friday.

The deficit between imports and exports of goods and services dropped 6.7 percent compared to December to $45.3 billion, with two-thirds of the decline accounted for by China, according to the report.

President Donald Trump's trade confrontation with China escalated in 2019, leading to tariffs on nearly all products traded with the country. 

A truce declared in January left many of those punitive duties in place, and agreements to ramp up US exports are not yet reflected in the data -- and likely will be delayed by the coronavirus epidemic that has clamped down on transport and production.

The US deficit with China shrunk by $2.1 billion, as imports from the world's second largest economy fell $1.8 billion compared to the prior month, the report said.

The total trade gap is nearly 16 percent lower than it was in January 2019, before the bulk of the tariffs hit.

Meanwhile, the deficit with Canada plunged $3.7 billion as imports fell $2.9 billion, which included a nearly $400 million drop in imports of vehicles and parts, according to the data.

The deficit with Mexico also narrowed in the month when Trump signed the new continental free trade pact, USMCA.

The US still maintains a surplus in services trade of $21.7 billion.