as American consumers redirected spending away from imported goods and toward domestically-produced

• The trade deficit narrowed in April from March’s record high level.
• The trade deficit ballooned in 2020 and early 2021 as consumers splurged on imported goods.
• April’s narrower deficit reflects American consumers redirecting their spending toward domestically produced services and away from imported goods.
• Trade will be positive for real GDP growth in the second quarter of 2021 and in the second half of the year.

The trade deficit in goods and services narrowed to $68.9 billion dollars in April, down $6.1 billion from March’s $75.0 billion; March’s deficit was revised from $74.4 in the prior release.

Exports rose 1.1% to $205.0 billion, with goods exports up 1.1% to $145.3 billion and services exports up 1.2% to $59.7 billion. Imports fell 1.4% to 273.9 billion, with goods imports down 1.9% to $232.0 billion, while services imports rose 1.8% to $41.9 billion.

U.S. goods exports of foods, feeds, and beverages, industrial supplies, and capital goods rose on the month, with exports of auto vehicles and consumer goods edging lower. In goods imports the trends were similar: imports of foods, feeds, beverages, and capital goods rose, while imports of industrial supplies, auto vehicles, and consumer goods fell. The semiconductor shortage continues to weigh on production and trade in autos.

Both exports and imports of travel and transport services rose solidly in April. As the pandemic comes under control, international travel is starting to recover from very depressed levels. Spending on transport services is increasing as global supply chain disruptions raise shipping costs.

The April trade report shows the U.S. economy’s expected shift from spending on goods to services was already underway in the spring. The U.S. is a big net importer of consumer goods, which accounted for over half the trade deficit between January and April. U.S. trade is more balanced in other goods categories, and the country runs a surplus in the services trade.

Consumers splurged on goods during the stay-at-home economy’s boom in 2020 and early 2021, since pandemic restrictions reduced spending on meals out, vacations, and other services. With the pandemic coming under control, consumers are redirecting their spending towards domestically produced services and away from imports.

In 2020 and the first quarter of 2021, the trade deficit’s surge to record highs showed up in GDP reports as a big drag on economic growth. With the domestic services sector rapidly reopening, that drag is already reversing in the second quarter of 2021. As consumer spending patterns normalize and the trade deficit shrinks further, trade will show up as a tailwind to GDP growth in the second quarter of 2021 as well as the back half of the year.

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