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Summary
With much of the world shunning Russia, countries have turned to the United States for the supply of key commodities. In this short special report we detail how Russia-related supply issues are helping propel export growth and are contributing to the normalization of the U.S. trade balance.
U.S. export growth has started to turn a corner, with real goods exports outpacing imports amid a sizable lift in exports of industrial supplies & materials specifically.
A look under the hood of recent industrial supplies strength suggests the gain was very much tied to goods that have been at the forefront of supply bottlenecks due to the Russia-Ukraine conflict. Categories associated with natural gas, oil and fertilizer accounted for nearly 70% of the gain in industrial supplies exports in June alone.
Russia was previously a large supplier of solid fuel and natural gas to Europe, but as much of the world shuns Russia, the United States is helping to fill the gap by supplying more of those goods than it was before the war.
According to the EIA, the U.S. became the world's largest liquefied natural gas (LNG) exporter during the first half of the year and data suggests the U.S. is supplying more to Europe specifically.
It's unclear how long this boost will last for exports. Low inventories and colder months ahead suggest European demand should remain elevated, but a fire at a key U.S. LNG export facility is denting U.S. export capacity.
We expect the conflict will continue to give way to strength in exports and a narrowing in the U.S. trade deficit. Import growth should continue to slow as goods spending moderates, and while the rest of the world is not immune to the broader economic slowdown, some of these Russia-related supply issues are helping propel export growth higher.
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