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Since it’s not the usual same-day report, here are the highlights of Friday’s Census Bureau September U.S. trade report in a slightly different than usual format.  And there were lots of highlights, especially for those following President Trump’s current trip to Asia and his continuing efforts to renegotiate the North American Free Trade Agreement (NAFTA).   

September’s combined U.S. goods and services trade deficit increased modestly month-to-month, by 1.70 percent from an upwardly revised $42.77 billion to $43.50 billion. Though the total was the year’s second lowest (just behind August’s), it brought the overall shortfall year-to-date 9.30 percent above last year’s nine-month level. Yet arguably its most noteworthy details concern economies identified by the Trump administration as troublesome U.S. trade partners.

In particular, as the president begins his trip to Asia, the new trade figures showed that the chronic American goods shortfall with the region fell 6.71 percent sequentially, from $44.48 billion to $41.49 billion. Merchandise exports to the Census Bureau’s Pacific Rim country grouping (which does not include Western Hemisphere economies) rose 4.90 percent on month, from $32.27 billion to $33.85 billion. Goods imports, however, fell by 1.83 percent, from August’s record $76.76 billion to $73.35 billion (still the third highest total ever).

On a year-to-date basis, the goods trade gap with the Pacific Rim is up by 2.03 percent.

The new trade figures remind that Mr. Trump’s goal of reducing American trade deficits with NAFTA signatories Canada and Mexico will be a tall order.

The combined NAFTA merchandise deficit actually plunged by 14.63 percent month-to-month, from $6.97 billion to $5.95 billion. The total was the second lowest of the year – nosing out July’s $5.99 billion.

U.S. goods exports to its North American neighbors declined by 1.84 percent sequentially, from $45.04 billion to $44.21 billion, while goods imports dropped by 3.56 percent on month, from $52.01 billion to $50.17 billion.

Year-to-date, however, the NAFTA goods deficit is 24.16 percent higher.

Bilateral trade developments within these regional flows also warrant attention.

The massive and chronic U.S. trade deficit with China – which the president hopes will help pressure North Korea to abolish its nuclear weapons program even has he has targeted its predatory trade practices – slipped sequentially in September by 0.73 percent, from $34.89 billion (the highest total of the year) to $34.64 billion (the second highest total).

America’s goods exports to the strongly growing Chinese economy decreased on month by 1.11 percent, from $10.93 billion (the year’s highest total) to $10.80 billion (the second highest total).

U.S. merchandise purchases from China slipped by 0.82 percent on month, from $45.82 billion (the all-time record) to $45.44 billion (the third highest total ever).

Year-to-date, the merchandise deficit with China is up 6.27 percent.

Japan, has expressed special alarm over the dramatic recent improvement of North Korea’s nuclear arsenal, but is also trying to reconstruct the Trans-Pacific Partnership trade deal without the United States. It saw its even longer-standing merchandise surplus with the United States plummet 26.17 percent sequentially in September, from $6.55 billion to $4.84 billion.

U.S. goods exports to Japan grew by 10.41 percent month-to-month in September, from $5.41 billion to just under $5.97 billion – the second highest total of the year after the just over $5.97 billion figure of April.

U.S. goods imports from Japan sank by 9.66 percent sequentially, from $11.96 billion to $10.81 billion.

All the same, on a January-to-September basis, the American merchandise deficit with Japan is 1.32 percent higher than last year’s nine-month total.

South Korea is on the front lines of the Korean peninsula crisis, and President Trump has launched an effort to revamp its 2012 bilateral trade agreement with the United States. Its merchandise trade surplus with the United States fell by 12.25 percent on month in September, from $2.22 billion to $1.95 billion.

U.S. goods sales to South Korea improved sequentially by 2.38 percent, from $3.74 billion to $3.83 billion, while goods imports shrank by 3.06 percent, from $5.96 billion to $5.77 billion.

Year-to-date, the American goods deficit with South Korea is way down: by 24.01 percent. But since the trade deal with the United States went into effect, in March, 2012, it’s up more than 247 percent on a monthly basis.

Within North America, the goods deficit with Mexico was down 7.67 percent on month in September, from $6.18 billion to $5.70 billion.

U.S. goods exports to Mexico – many of which are industrial inputs that return to the United States as final products – fell by 3.75 percent sequentially, from $20.87 billion to $20.09 billion. America’s merchandise imports from Mexico dropped by 4.64 percent, from $27.05 billion to $25.79 billion.

Year-to-date, the U.S. goods deficit with Mexico is up 10.93 percent from the January-to-September period last year.

Trade balances with Canada – which has been a target of several contentious American trade law actions during President Trump’s first year – have been exceptionally volatile lately. The September merchandise deficit with Canada nosedived by 68.77 percent on month – from $794 million to $248 million, the lowest total of the year.

American goods sales to Canada dipped by 0.19 percent sequentially, from $24.17 billion to $24.13 billion, while goods purchases from Canada dropped by 2.38 percent, from $24.97 billion to $24.37 billion.

Year-to-date, though, the merchandise deficit with Canada is up nearly 153 percent.

The September trade figures also reflected the receding impact of this year’s violent hurricane season.

Principally, the U.S. trade deficit in oil, much of whose production and transport infrastructure is located on the Texas and Louisiana Gulf coasts, soared sequentially in August by 61.65 percent in pre-inflation dollars (from $3.02 billion to $4.88 billion), largely because exports fell by 11.54 percent. That monthly export decrease was the biggest since August, 2015’s 12.62 percent.

In September, however, oil exports rebounded on month by 13.59 percent. That was the biggest monthly increase since May, 2016’s 15.47 percent. And the oil deficit shrank by 17.82 percent, to $4.01 billion – the year’s second lowest total after July.

The overall September trade deficit rose even though exports across the board performed well that month.

Total exports hit $196.82 billion – their highest level since December, 2014 ($197.18 billion). The same held for goods exports, whose $130.58 billion was their best total since December, 2014’s $134.19 billion.

Moreover, services exports hit their second straight all-time high ($66.24 billion).

Yet the much larger amount of imports grew fast enough to more than offset these gains.

Total imports hit rose 1.18 percent on month in September – the fastest rate since January’s 2.83 percent. And the $240.31 billion level was the second highest of the year, after January’s $240.47 billion.

Goods imports rose 1.22 percent on month in September – also the fastest rate since January (3.09 percent). And the $195.97 billion total was also the second highest of the year (after January’s $197.07 billion).

The September monthly increase in services imports (0.98 percent) was also the biggest since January (1.05 percent). And the $44.34 billion total was a new all-time high (passing July’s $44.14 billion).

The huge and chronic American manufacturing trade deficit retreated from August’s monthly record of $82.15 billion. But at $79.91 billion, it was more than enough to keep the shortfall running 5.95 percent ahead of last year’s record shortfall.

Similar trends seem to be unfolding in the nation’s high tech goods trade. The volatile monthly deficit in this category jumped by 15 percent on month in September, to $10.34 billion. That was the second highest total of the year (after May’s $9.47 billion).

Year-to-date, the high tech goods shortfall is up 23.64 percent, a rate of increase that would enable it to surpass the full-year record of $98.72 billion, set in 2011.

Nevertheless, the September figures also made clear that trade’s drag on the current U.S. economic recovery – created by the increase in the trade deficit since the end of the last recession – continued decreasing.  As shown in last week’s initial real gross domestic product (real GDP) data, trade’s overall hit to American growth since the recovery began in mid-2009 has fallen from 10.04 percent in the first quarter to 9.24 percent in the second quarter to 8.18 percent in the third quarter (according to the initial read on the latter). That last number translates into $229.2 billion in lost growth after inflation. 

The September trade figures enable the growth hit to be calculated for the increase in the inflation-adjusted Made in Washington trade deficit – i.e., in those trade flows heavily influenced by American trade agreements and related policy decisions. This trade shortfall, which excludes commerce in energy and services, has sliced recovery-era growth by $459.19 billion after inflation, or 16.39 percent. 

As big as that sounds, its smaller proportionately than the cost of the Made in Washington deficit as of the second quarter – 17.30 percent.    

 

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