As Congress’ debate over President Obama’s trade agenda heats up, yesterday’s revised government figures on the gross domestic product (GDP) have made the economic costs of current U.S. trade policies clearer than ever. They show that U.S. trade flows slowed growth during the last three months of last year and for the full year more than first estimated. As a result, they have undercut the current sluggish economic recovery to a greater extent than previously thought.
Here are the trade highlights from yesterday’s official figures, which update initial estimates published last month of the GDP and economic growth for the fourth quarter of 2014, and the full year.
>The revised fourth quarter GDP 2014 figures show that the growth slowdown at the end of last year was spurred mainly by a rebound in the inflation-adjusted U.S. trade deficit to its highest level ($476.4 billion on an annualized basis) since the third quarter of 2010 ($498.4 billion). Last month’s first look at fourth quarter 2014 GDP pegged the annualized trade deficit at $471.5 billion
>Whereas trade flows added 0.78 percentage points to the third quarter’s strong 5.00 percent annualized real growth, they subtracted 1.15 percentage points from the fourth quarter’s much lower 2.17 percent real GDP advance. The advance figures from last month showed that the trade deficit’s after-inflation increase cut only 1.02 percentage points from the fourth quarter’s 2.62 percent annualized growth estimate.
>On a full-year basis, whereas a narrowing of the U.S. trade deficit added 0.22 percentage points to real GDP growth’s 2.20 percent real growth in 2013, the gap’s widening subtracted 0.23 percentage points from last year’s 2.39 percent growth in real terms. That’s a bigger bite than the 0.22 percentage points subtracted from the 2.42 percent 2014 growth figure released last month.
>2014 remains the first year during which the trade deficit worsened, and therefore slowed growth, since 2011.
>Since the current economic recovery began in the middle of 2009, the trade deficit’s increase has cut cumulative real GDP growth by 5.68 percent – a price that was almost entirely paid by the U.S. private sector and its workers. According to last month’s preliminary forth quarter and full-year 2014 figures, the trade hit to the inflation-adjusted recovery was 5.38 percent.
>Moreover, this trade deficit worsening has taken place despite the remarkable recent improvement in the nation’s energy trade.
>Indeed, the U.S. non-oil goods trade deficit’s increase in real terms, according to the latest (December and full-year 2014) trade figures has cut the cumulative growth of the current weak American recovery by 15.87 percent. Worse, virtually all of this lost growth has come in the private sector.
>The non-oil goods trade data is especially important because these are the trade flows that are most strongly influenced by trade agreements and related policy decisions. The dramatic trade deficit worsening and resulting GDP hit strongly indicate that the new trade agreements being pushed by President Obama – which are modeled on current trade deals – will further undercut growth, and by extension, job-creation.
>The revised GDP figures pushed the increase in U.S. real exports since the first quarter of 2009 to 38.12 percent from 37.98 percent. Nonetheless, they still fall way short of President Obama’s commitment to double them by the end of 2014. Future revisions cannot possibly upgrade this dismal performance significantly.