WASHINGTON, D.C.: The US trade deficit narrowed in 2023 to the smallest in three years, government data showed on Wednesday, while the country imported more goods from Mexico than China for the first time in about two decades.

The latest figures add to a series of positive economic news for President Joe Biden, who has been working to boost sentiment on his handling of the economy as his November reelection campaign picks up pace.

For all of 2023, the overall trade gap was $773.4 billion, down 18.7 percent from the $951.2 billion figure in the prior year, US Commerce Department figures showed.

In 2022, the country saw the biggest deficit in government data dating back to 1960.

But the latest numbers showed a fall in the goods deficit last year, with imports of products dropping more than exports.

Purchases of supplies like crude oil and fuel oil fell, while Americans bought less consumer goods like clothing and cell phones as well.

This was partly due to the unraveling of consumption patterns during the Covid-19 pandemic, during which people cooped up at home spent on items like electronics as they worked remotely.

Meanwhile, exports of services increased last year, particularly in the travel sector, and the services surplus widened.

Surprisingly resilient consumption last year has helped to support the US economy, but analysts expect higher interest rates to slow consumer spending and add pressure on imports.

Slower demand

In December, the deficit grew slightly from November to $62.2 billion, the new data showed.

This was up from November's revised $61.9 billion level.

With imports and exports both growing in the final month last year, analysts considered the report an encouraging sign for global trade.

"The trade deficit in real terms contributed positively to growth in the quarter," said Matthew Martin, US economist at Oxford Economics.

He added that "exports continue to fare well and will benefit from a weaker dollar as the cost of US goods becomes relatively cheaper abroad," expecting net trade to be a positive contributor to gross domestic product (GDP) growth in early 2024, too.

But Rubeela Farooqi, chief US economist at High Frequency Economics, said in a note that "the outlook for trade flows going forward is likely one of moderation."

This is due to "expectations of slower demand and growth going forward, both domestically and abroad," she said.

Mexico, China trade

The Commerce Department data also showed that the United States bought more goods from Mexico than China in 2023, a first in around two decades.

This comes as Washington has been pursuing an approach it calls "friendshoring."

The move involves diversifying US supply chains across allies and partners amid heightened concern about competition with China and national security tensions between the world's two largest economies.

And there are signs that simmering tensions have left their mark.

In 2023, imports from Mexico jumped by $20.8 billion to $475.6 billion, while the corresponding figure for China fell to $427.2 billion.

The US goods deficit with Mexico rose to $152.4 billion while that with China decreased to $279.4 billion during that period.

The US trade deficit with China has been a political focus during the trade war between both countries under former president Donald Trump's administration, which imposed tariffs on Chinese goods.

The Biden administration has generally maintained the levies.