Soaring Dollar Hits US Trade, Sends Goods Trade Deficit To Highest Since March 2015

Who could have possibly thought that a soaring dollar would have an adverse impact on the US trade deficit, and thus, the US economy. Well, not the Fed, if only for now, because just as the Fed hiked rates only for the second time in a decade, the US advance goods trade deficit soared from $61.9 billion to $65.3 billion, far higher than the consensus print of $61.6 billion. This was the highest advance trade gap since March of 2015 when the dollar was likewise soaring.

The reason for the far greater than expected deficit: exports of goods fell 1.0%, while imports of goods rose 1.2%.

Exports of Goods were down 0.99% in November, according to the advance estimate. Most of this $1.2 billion decline came from a $1.8 billion drop in exports of capital goods, which was offset by a $1.2 billion rise in exports of industrial supplies.

Imports of Goods were up 1.19% in November, according to the advance estimate. This $2.2 billion rise was largely a result of a $2.0 billion rise in industrial supplies imports.

All else, equal, this means that Q4 GDP is about to be revised between 0.2% and 0.4% lower, from its current perch, which according to the Atlanta Fed is currently at 2.5%.