U.S. Dollar Faces Bearish Pressure as Trade Deficit Hits $78.2B in November

U.S. Trade Deficit Widens in November – Impact on USD and Market Outlook

The U.S. trade deficit expanded in November 2024, rising to $78.2 billion, a $4.6 billion increase from October’s revised $73.6 billion, according to data from the U.S. Census Bureau and Bureau of Economic Analysis. This marks a 6.2% monthly increase in the goods and services gap, signaling stronger import activity outpacing export growth.

What Drove the Deficit Increase?

Exports rose by 2.7% to $273.4 billion, while imports climbed 3.4% to $351.6 billion. The goods deficit widened by $5.4 billion to $103.4 billion, partially offset by a $0.9 billion increase in the services surplus, which reached $25.2 billion.

On the export side, industrial supplies and materials contributed significantly, with a $4.3 billion rise driven by petroleum products and crude oil. Automotive exports grew by $1.9 billion, reflecting higher shipments of passenger cars and trucks. Capital goods also showed strength, rising $1.8 billion, led by aircraft engines and machinery.

However, imports surged at a faster pace. Goods imports increased by $11.6 billion, with notable contributions from industrial supplies ($3.7 billion), capital goods ($3.5 billion), and food products ($1.4 billion). Higher semiconductor imports, along with crude oil and nonmonetary gold, signaled strong domestic demand.

Year-to-Date Trade Trends

For the year to date, the trade deficit widened by $93.9 billion, up 13% from the same period in 2023. Exports rose 4% to $111.5 billion, while imports advanced 5.8% by $205.3 billion. The three-month moving average of the trade deficit also increased by $2.5 billion, reflecting persistent imbalances.

Key Country-Specific Trade Movements

The U.S. maintained surpluses with countries like the Netherlands ($5.4 billion) and South and Central America ($3.6 billion). However, deficits with China ($25.4 billion), the European Union ($20.5 billion), and Mexico ($15.4 billion) continued to weigh on overall balances. A notable increase in the deficit with France by $2.2 billion to $2.3 billion highlights rising imports of French goods.

The U.S. trade relationship with Japan showed improvement, with the deficit narrowing by $1.2 billion to $5.3 billion, driven by increased exports and reduced imports.

Market Outlook – Bearish for USD

A widening trade deficit typically pressures the U.S. dollar by indicating stronger demand for foreign currencies to finance imports. November’s data suggests this trend is likely to continue, contributing to a bearish short-term outlook for the dollar. Traders should expect increased volatility in currency markets as import growth outpaces exports.

Export-heavy sectors may face headwinds, while import-driven industries, such as retail and consumer goods, could benefit from rising foreign supply. However, the overall market impact will depend on broader economic conditions and inflationary pressures.