Today’s initial first quarter GDP figures show that U.S. trade flows took their biggest relative toll from sequential growth since the fourth quarter of 2002. In fact, the overall trade deficit’s worsening has now slowed the U.S. economy’s current weak recovery by just under eight percent, with nearly all the damage done in the private sector.
As of the end of 2014, the trade hit to growth from flows heavily influenced by trade deals and related policies was nearly twice as great. Worse is sure to come if the president persuades Congress to pass new agreements based on deficit-boosting predecessors. Despite West Coast ports labor problems, moreover, real imports and real goods imports both hit new records, indicating how lopsided the nation’s trade performance remains.
Here are the trade highlights from this morning’s GDP report:
>The initial first quarter GDP figures show the trade deficit’s expansion delivered its biggest hit to sequential growth since the end of 2002. During that fourth quarter of that year, the trade deficit’s increase took 1.60 percentage points from an annualized growth figure of 0.30 percent. In the first quarter of this year, the trade deficit’s increase subtracted 1.25 percentage points from an annualized growth figure of 0.20 percent.
>During the fourth quarter of 2014, a widening sequential trade shortfall reduced 2.20 percent annualized growth by 1.03 percentage points.
>As of the new first quarter figures, the worsening of the trade deficit has reduced the cumulative real growth of the U.S. economy by 7.99 percent since the current recovery began in the second quarter of 2009.
>This figure, however, includes the huge improvement the nation has enjoyed in its oil trade thanks to the recent domestic energy production revolution.
>Contrary to the claims by President Obama and supporters of his trade agenda, the trade hit to the recovery delivered by trade agreements and related policies has been much bigger. Strip out oil (not a subject of trade talks) and services (where liberalization remains at an early stage), and as of full-year 2014, the worsening of the remaining, policy-shaped trade deficit has slowed the recovery by 15.70 percent – with nearly all the damage done in the private sector.
>The release of the monthly trade report for March next week will enable calculation of this figure for the first quarter of 2015, but today’s GDP numbers indicate that it has increased substantially.
>The new GDP figures suggest that the effect of West Coast ports problems on America’s trade flows has been largely one-way. U.S. overall real exports and real goods exports both fell significantly from the fourth quarter of 2014 to the first quarter of 2015 (by 7.2 percent and 13.3 percent, respectively). Indeed, the latter figure was the worst since the 34.90 percent nosedive in the first quarter of 2009 – the depths of the recession.
>Yet overall imports and goods imports both hit new records. The former rose sequentially by 1.80 percent, to $2.6102 trillion annualized; the latter increased by 0.90 percent, to $2.1276 trillion. Both figures were significantly higher than the overall economy’s real growth rate.