Stronger dollar makes US current account deficit worse

US recorded $-51.4 billion in trade deficit for March, with stronger dollar contributing to the fall. While export of goods increased $1.5 billion to $127.1 billion in March, imports increased by $ 16.4 billion to $197.6 billion, widening deficit by $15.5 billion from February's $-35.9 billion.

Key highlights -

• Major contributor to deficit was increase in consumer goods of $9 billion from previous period, followed by capital goods by $ 4 billion.
  
  
• US registered major trade deficit with China and Japan. Deficit with China increased $10.5 billion to $37.8 billion. Deficit with Japan increased by $2 billion to $6.3 billion.

Impact -

• FED would be considering dollar's negative impact on trade balance before going for a rate hike. Might even skip rate hike in June and hike at a later date as expected by market participants and would stress on gradual rate hike to lower the dollar. Might even use verbal communications to push dollar lower.

• Analyzing the deficit it is very clear, that US is registering about 70% of its total deficit from trades with China. US lawmakers would be preparing trade measures that would reduce China's trade advantage. Such measure would be painful for China, which already is facing economic headwinds.