USA CAD hike in Q1 to $124.1 billion!
The U.S. current-account deficit increased to $124.1 billion (preliminary) in the first quarter of 2018 from $116.1 billion (revised) in the fourth quarter of 2017, according to statistics released by the Bureau of Economic Analysis (BEA). The deficit was 2.5 percent of current-dollar gross domestic product (GDP) in the first quarter, up from 2.4 percent in the fourth quarter.
The $8.0 billion increase in the current-account deficit reflected an $8.1 billion increase in the deficit on goods and relatively small and nearly offsetting changes in the balances on services, primary income, and secondary income. Exports of goods and services and income receipts increased $23.0 billion in the first quarter to $913.4 billion. Imports of goods and services and income payments increased $30.9 billion in the first quarter to $1,037.5 billion.
In the international transactions accounts, income on equity, or earnings, of foreign affiliates of U.S. multinational enterprises in a period typically consists of a portion that is repatriated to the parent company in the United States in the form of dividends and a portion that is reinvested in foreign affiliates.
At times, repatriation of dividends exceeds current-period earnings, resulting in negative values being recorded for reinvested earnings. In the first quarter of 2018, direct investment earnings were $130.6 billion, reflecting dividends and withdrawals of $305.6 billion and reinvested earnings of -$175.0 billion.
The large magnitudes for dividends and withdrawals and the negative reinvested earnings reflect the repatriation of accumulated earnings by foreign affiliates of U.S. multinational enterprises to their parent companies in the United States in response to the 2017 Tax Cuts and Jobs Act (TCJA).
The TCJA requires U.S. parent companies to pay a one-time tax on their accumulated earnings held abroad, but generally eliminates taxes on repatriated earnings. The negative reinvested earnings of -$175.0 billion reflect the fact that dividends exceeded earnings in the first quarter and U.S parent companies withdrew accumulated prior earnings from their foreign affiliates.
The negative reinvested earnings are also reflected in the net acquisition of direct investment assets in the financial account, which was -$119.6 billion in the first quarter of 2018.
