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Trade war

US trade deficit shrinks in January as Chinese imports dip

Beijing's purchase of American soybeans also bridges gap

China bought more soybeans from the U.S. in January, helping to address the trade imbalance between the two countries.   © Reuters

NEW YORK -- The U.S. trade deficit narrowed 14.6% on the month in January in part as Americans bought fewer goods from China and sold more soybeans to the Asian nation, a changing dynamic that could affect ongoing trade talks.

The total trade deficit in goods and services reached a seasonally adjusted $51.1 billion, down $8.8 billion from December, the U.S. Department of Commerce announced Wednesday.

A shift in trade with China alone accounted for $5.5 billion of the decrease, which brought the U.S. goods trade deficit with China down to $33.2 billion. Chinese imports into the U.S. declined $5.7 billion on the month to $40.8 billion in January, down 11.2% on the year.

The new statistics demonstrate the fluid trade dynamics between the two sides as they continue to grope for a deal to end their trade war.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin resume talks Thursday in Beijing, where they will meet with Chinese Vice Premier Liu He.

January's plunge in Chinese imports can be attributed to companies rushing to stock up ahead of an anticipated U.S. tariff hike that has now been delayed from New Year's Day by President Donald Trump.

"There was a fear that U.S. tariffs toward China were going to go up on Jan. 1," said David Dollar, a senior fellow at the Brookings Institution. "So there was what we call front-loading."

Taking December and January goods data together, U.S. trade figures show that while Chinese imports declined by about 3%, or a seasonally adjusted 5%, on the year, American exports to China fell nearly a third.

The result was that "the U.S. trade imbalance with China got bigger," Dollar said.

One notable point in January's data is U.S. soybean exports, which soared to $1.2 billion from $299 million the month before to account for half of the increase in the country's exports of goods.

Chinese imports of American soybeans plunged to zero in November but resumed in December after Trump announced a 90-day trade truce following his meeting with President Xi Jinping at the Group of 20 summit in Argentina. Chinese state-owned companies Cofco and Sinograin each confirmed additional purchases of American soybeans.

China has imposed retaliatory 25% tariffs on U.S.-produced soybeans but is expected to further ramp up purchases if a trade deal is reached.

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