U.S. Trade Deficit Decreases

The U.S. current-account deficit decreased to $130.4 billion (preliminary) in the first quarter of 2019 from $143.9 billion (revised) in the fourth quarter of 2018, according to statistics released by the Bureau of Economic Analysis.

Basically, when we import more goods, services and capital than we export, we run a current account deficit. It’s a wider measure of our trade in imports and exports than the “goods and services” measure.

The deficit was 2.5 percent of current-dollar gross domestic product in the first quarter, down from 2.8 percent in the fourth quarter.

The $13.5 billion decrease in the current-account deficit mostly reflected a decrease in the deficit on goods that was partly offset by an increase in the deficit on secondary income.

Exports of goods and services and income receipts increased $7.2 billion in the first quarter to $945.9 billion.

Imports of goods and services and income payments decreased $6.3 billion in the first quarter to $1.08 trillion.

Effects of the 2017 Tax Cuts and Jobs Act on Components of the International Transactions Accounts

In response to the 2017 Tax Cuts and Jobs Act, which generally eliminated taxes on repatriated earnings, some U.S. multinational enterprises repatriated accumulated prior earnings of their foreign affiliates.

In the first, second, and fourth quarters of 2018, the repatriation of dividends exceeded current-period earnings, resulting in negative values being recorded for reinvested earnings.

In the first quarter of 2019, dividends were $100.2 billion while reinvested earnings were $40.2 billion. The reinvested earnings are also reflected in the net acquisition of direct investment assets in the financial account.