Aided by a jump in exports and a dip in imports, the U.S. trade deficit unexpectedly plunged 13.2% in October to $38.7 billion -- the lowest level since January, the U.S. Commerce Department announced Friday.

A Bloomberg survey had expected the trade deficit to remain unchanged in October at $44.0 billion, after a revised $2.3 billion drop to $44.6 billion in September.

Deficit with China Narrows

In October, exports surged 3.2% to a two-year high of $158.7 billion after an 0.5% increase in September. Meanwhile, imports fell 0.5% to $197.4 billion after a 0.7% decrease in September.

The year-through-October trade deficit is $420.4 billion, up about 39.1% from the $302.5 billion total for the same period a year ago. However, that's down slightly from the year-to-September trade deficit increase of 40.2%.

In October, the real goods trade deficit, which controls for inflation, decreased to $45.2 billion -- its lowest level since April -- from $50.3 billion in September.

In addition, the trade deficit with key U.S. trade and investment partner China plunged to $25.5 billion in October, from $27.8 billion in September.

The export gain was aided by a weaker dollar, which boosted sales of automobiles, industrial items and supplies, and food and agricultural products. The dollar has fallen about 7% versus the world's other major currencies since early June.

Obama Wants U.S. Exports to Double

Meanwhile, President Barack Obama has set a goal of doubling the nation's exports in five years -- a daunting task, given intense global competition, most trade experts agree. Even so, the U.S.'s new trade pact with South Korea will aid that effort.

The agreement, which still has to be ratified by the U.S. Congress, has the backing of two powerful American unions, the United Auto Workers and the United Food and Commercial Workers, the New York Times reported Wednesday.

Economists generally prefer that a nation run a trade surplus as opposed to a trade deficit, as it usually implies that a nation's goods are competitive on the world stage, its citizens are not consuming too much, and that it's amassing capital for future investment and economic goals.

In October, trade surpluses were recorded with Hong Kong, $1.9 billion, down from $2.3 billion in October; Australia, $1.3 billion, up from $1.2 billion; Singapore, $600 million, down from $700 million; and Egypt, $500 million, down from $600 million.

Trade deficits were recorded with China, $25.5 billion, down from $27.8 billion in October; European Union, $7.1 billion, up from $6.1 billion; Mexico, $5.8 billion, unchanged from October; OPEC, $5.7 billion, down from $8.9 billion; Japan, $5.7 billion, up from $5.0 billion; Germany, $3.3 billion, up from $2.7 billion; Ireland, $2.7 billion, up from $2.2 billion; Venezuela, $1.2 billion, down from $1.9 billion; South Korea, $1.1 billion, down from $1.3 billion; Canada, $1.1 billion, up from $900 million; and Taiwan, $1.0 billion, up from $900 million.

October: A Pleasant Surprise

October's trade deficit report was certainly a very pleasant surprise, due to the impressive rise in exports. To be sure, the weaker dollar has made U.S. products (such as farm tractors and commercial jets) and services (such as software) more attractive to foreign buyers -- it makes them cheaper -- but there's another factor in the exports rise: emerging market demand.

Emerging markets such as India, Mexico, and Brazil are building-out their infrastructures and the United States has the products and services they need. As long as these young, developing economies continue to grow, that bodes well for U.S. exports, for the revenue of U.S.-based multinational corporations, and for the U.S. economy.

Further, while rising exports alone probably won't eliminate the U.S. trade deficit, it can decrease it substantially -- which will keep more income and wealth at home in the United States for business investment and domestic savings and consumption.

Increase your money and finance knowledge from home

Economics 101

Intro to economics. But fun.

View Course »

Getting out of debt

Everyone hates debt. Get out of it.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:
hi cat

If you can find a product that is made in USA BUY IT ! Do without any purchase until you can find it made in the USA. If enough of us do that the economic recovery will be on its way FOR REAL AMERICANS. Let those " Citizens of the world" go live in Guadalajara, Mexico near their slave factories. Take Bill Clinton with you the water boy for NAFTA.

December 12 2010 at 7:35 AM Report abuse rate up rate down Reply

I despise labor unions. And I will not be told what to buy and what not to buy from MY government. But of course I prefer to purchase products from my nation; you know; national pride, etc. The first thing I do is turn over the product I am interested in, and determine where it was made; China, India, Canada, Mexico? Sorry guys.

December 10 2010 at 10:34 AM Report abuse -2 rate up rate down Reply
1 reply to chrishuff2's comment

Did it ever occur to you number crunchers that nobody is buying nothing, cause of the economy. I have since practically March or even sooner, of this year BOUGHT NOTHING except food, and essentials. and then it better be made in USA. case in point Walmart had area rugs on sale and my daughter's rug is very old, 20 years, so we bought a new on and it was made IN USA at Walmart surprise.

December 10 2010 at 10:32 AM Report abuse +3 rate up rate down Reply