Implications: Trade volatility continued in January as the trade deficit significantly shrank to $54.5 billion in January after widening sharply in December. The decline in the deficit for the month was due to both a rise in exports, which increased $15.8 billion, as well as a decline in imports, which fell $2.6 billion. A noticeable part of the decline in the deficit in January came from nonmonetary gold – a category not included in GDP calculations – which will soften the impact of net exports on Q1 GDP. We like to focus on total volume of trade, imports plus exports, as it shows the extent of business and consumer interaction across the border. That measure rose by $13.3 billion in January, but is still down 2.5% (or $17.1 billion) from a year ago.  Over the past year, exports have risen 10.4% while imports declined 11.3%. The GDP math related to the trade deficit suggests that so far, on net, more of what we purchased overall was made domestically, meaning faster real GDP growth.  Meanwhile, the landscape of global trade continues to evolve. China, once the dominant exporter to the U.S., has slipped to a fourth place behind Mexico, Canada, and now Taiwan, with exports to the U.S. down 49.4% in January versus January 2025. Accelerated demand for high tech equipment to fuel the massive AI investment is clear in the data with imports from Taiwan up 96% in January versus January 2025. Also in today’s report, the dollar value of U.S. petroleum exports once again exceeded imports, marking the 47th consecutive month of America being a net exporter of petroleum products. In other news this morning, initial jobless claims declined 1,000 last week to 213,000, while continuing claims fell 21,000 to 1.850 million.  This is consistent with modest job growth in March.

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