The U.S. trade deficit fell more than expected in February as exports increased to a two-year high and slowing domestic demand weighed on imports.
The Commerce Department said on Tuesday the trade gap declined 9.6 percent to $43.6 billion. January’s trade deficit was revised slightly down to $48.2 billion from $48.5 billion.
Economists polled by Reuters had forecast the trade gap falling to $44.8 billion in February.
When adjusted for inflation, the deficit decreased to $59.7 billion, with exports of goods the highest on record as an earlier drag from a strong dollar fades. The real trade deficit was $65.1 billion in January.
The dollar held modest gains versus a basket of currencies after the data, while prices for U.S. Treasuries were little changed.
Most economists expect trade will likely be a small drag on gross domestic product in the first quarter after subtracting 1.82 percentage points from fourth-quarter growth.
In addition to trade, weak consumer spending also likely constrained the economy in the first three months of the year. The Atlanta Federal Reserve is forecasting GDP rising at a 1.2 percent rate in the first quarter, a deceleration from the 2.1 percent pace logged in the October-December period.
The Trump administration is eyeing trade as a vehicle to lift annual economic growth to 4 percent and boost the manufacturing sector. President Donald Trump last Friday ordered a study into the causes of U.S. trade deficits and a clamp-down on import duty evasion.
Trump also wants to renegotiate the North American Free Trade Agreement (NAFTA), which was signed in 1994 by the United States, Canada and Mexico.
In February, exports of goods and services increased 0.2 percent to $192.9 billion, the highest level since December 2014. Exports were lifted by gains in the shipments of automobiles and parts, which were the highest since July 2014.
Exports of industrial supplies and materials were the highest since December 2015. There was an 8.0 percent jump in exports to the European Union, with goods shipped to Germany surging 8.6 percent. Exports to the United Kingdom soared 17.3 percent and Japan also bought more goods from the United States.