© Reuters. FILE PHOTO: Shipping containers are unloaded from ships at a container terminal at the Port of Long Beach-Port of Los Angeles complex, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles, California, U.S., April 7, 2021. REUTERS/Lucy Nicholso
WASHINGTON (Reuters) – The U.S. trade deficit contracted by the most in nearly 14 years in November as slowing domestic demand amid higher borrowing costs depressed imports.
The trade deficit decreased 21.0% to $61.5 billion, the lowest level since September 2020, the Commerce Department said on Thursday. The percentage decline in the trade gap was the largest since February 2009.
Imports tumbled 6.4% to $313.4 billion, with goods dropping 7.5% to $254.9 billion. Consumer goods imports were the lowest since December 2020.
The Federal Reserve last year hiked its policy rate by 425 basis points from near zero to a 4.25%-4.50% range, the highest since late 2007. Last month, it projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023. The higher rates have boosted the dollar, which gained 5.4% against the currencies of the United States’ main trade partners last year.
Dollar strength is making U.S. manufactured goods less competitive on global markets. Monetary policy tightening by global central banks is also eroding demand.
Exports fell 2.0% to $251.9 billion, with goods shipments dropping 3.0% to $170.8 billion. But exports of automotive vehicles, parts and engines were the highest since August 2019.
A smaller trade deficit contributed 2.86 percentage points to the economy’s 3.2% annualized growth pace in the third quarter. Growth estimates for the fourth quarter are as high as a 3.9% rate.