The U.S. trade deficit for January reached $48.9 billion, according to official figures, the highest since January 2012. That was in-line with economists’ expectations according to Reuters, though that shouldn’t be a surprise given the advance goods deficit which was wider than expected, as discussed in Panjiva research of February 28.

The main driver of the expansion was the increase in goods imports, which contributed an additional $16.6 billion to the deficit on a year earlier. That was the biggest step up since 2012. While bridging both the Obama and Trump administrations, and being driven by increased consumer activity, this expansion will no doubt provide extra evidence for NTC Director Peter Navarro’s focus on the deficit. That was highlighted in a Wall Street Journal op-ed this week, including singling out Samsung Electronics and LG Electronics as “trade cheats”, and accusing Germany of being a currency manipulator.

This data will likely be included in NAFTA renegotiations, although these require a 90 day consultation period which has not yet been triggered. That may make data through April at least the baseline for negotiations.

Calculations based on U.S. Census Bureau data. Source: Panjiva

Arguably the biggest trade policy uncertainty right now is the border-adjustable tax. While normally discussed in the context of merchandise imports and exports, it may also be applied to services too. U.S. exports of services increased 3.7% on a year earlier in January, the seventh straight increase, led by maintenance (10.5% higher) and financial services (8.7%). Treatment of these may become a bargaining chip for countries negotiating with the U.S.

The complex structure of the President’s trade advisory group makes the outcome on BAT difficult to discern. Commerce Secretary Wilbur Ross referred to the BAT as needing to be a part of a broader balancing of the budget, CNBC reports. At the same time Treasury Secretary Mnuchin is reported by the Washington Post to be against the tax. Comments from President Trump at his speech to Congress also set it in a broader tax reform framework. It seems unlikely that countries will be willing to sign new deals until the BAT and currency manipulation accusations (and actions) are resolved.

Chart shows change in export services for January. Calculations based on U.S. Census Bureau data. Source: Panjiva