Q4 GDP Growth Could Also Exceed Expectations
Going way back to 2016, the Trump administration has been working hard to reduce the country’s trade deficit. This is one of the reasons that have led to the never-ending tariff battles between Washington and Beijing. Considering that this rare feat has been achieved ahead of trade negotiations between the two countries, reducted volatility it is possible when the two countries conduct negotiations. This might mean cooling down in tempers. Thus, leading to a marked reduction in the tariff battles that the two superpowers recently took part.
Apart from the reduction in a trade deficit that has defied projections, it is also possible that the growth in GDP will also run counter to economists’ estimates. The prediction was that the fourth quarter would record dismal or probably no growth at all. But there are indications that it might grow by as much as 2%. This scenario is possible for two main reasons. First, the reduction of hostilities between the U.S. and China augurs well for trade. Secondly, there has been a marked improvement in manufacturing activity globally. That means that the volatilities and uncertainties that were to blame for the weakening of the U.S. economy could be a thing of the past.
The Figures
Despite attempts to reduce the country’s trade deficit ever since President Trump took office, the gap has been growing until now. That is why predictions showed that the deficit would be $43.6 billion in November. But it turned out to be $43.06. The estimates aside, this was a marked improvement from the deficit of $46.9 recorded in October. In addition, the country’s exports rose by close to $1.5 billion while imports reduced by $2.5 billion.
Looking Ahead
Does the fall in the country’s trade deficit for the month gives business investors a reason to smile? Put it another way; is this rosy picture likely to be replicated in days to come?
While GDP growth in the fourth quarter may show improvement, there is no reason to believe that the same is to be expected in the days to come. The economy has recorded a reduced trade deficit mainly because of a reduction in the number of imports. But this is unlikely to be the case in the future. Especially when there has been a marked reduction in the import of capital goods. Considering that business investors ultimately have to look to China and other trade partners for such goods, it is easy to estimate that the reduction in imports is short-lived.
It is not all doom and gloom, however. The fact that the U.S. and China are on the verge of signing phase-one of an important trade deal has spurred optimism that this might eventually bring to an end the trade wars and the uncertainties that have marked business relationships between the two countries.
