With all the China trade war headlines in the news lately, the release this morning of the latest (for October) monthly U.S. trade data couldn’t be timelier. Indeed, one of the biggest takeaways from the results is that, as has been the case since the conflict began, the decoupling of the American and Chinese economies continues apace.
A second big takeaway: Boeing aircraft’s safety woes remain a major drag on domestic U.S. manufacturing’s trade performance and hence overall production (currently in mild recession) – and one having nothing to do with President Trump’s tariffs or foreign retaliation.
And a third important conclusion: Aside from the China trade account, the new report shows considerable improvement in some of the most important trade deficits run by the economy for decades.
One measure if decoupling is the humongous merchandise trade deficit the United States has run with China for so long. As of October, it’s down 14.60 percent year-to-date – even though the U.S. economy keeps growing. And in that vein, America’s overall non-oil goods trade deficit (the best global proxy for U.S.-China trade) rose by 4.04 percent during the same period.
The same trends are visible on the individual export and import sides, too. From January through October of this year, U.S. goods exports to China accounted for 7.13 percent of America’s worldwide total. For the comparable period last year, that figure was 8.22 percent. The analogous merchandise import figures were 19.78 percent and 23.28 percent.
Other highlights of the new monthly trade report:
>The combined goods and services trade deficit fell 7.63 percent sequentially in October, from a downwardly adjusted $51.10 billion to $47.20 billion. The October total is the lowest since May, 2018’s $44.35 billion. And the monthly drop was the biggest since January’s 12.61 percent.
>The downgrade of the September overall trade deficit was an unusually large 2.57 percent.
>The combined goods and services trade deficit is now running just 1.35 percent ahead of last year’s level. That’s a much slower rate of increase than the 13.89 percent rise between the two previous January-through-October periods.
>The overall trade deficit’s slower year-to-date increase was mainly the result of a dramatic decrease in the U.S. petroleum trade deficit – from $46.97 billion in the first ten months of 2018 to $13.93 billion between January and October of this year. That 70.34 percent nosedive contrasts with the aforementioned 4.04 percent increase in America’s non-oil goods trade deficit.
>At the same time, this “Made in Washington trade deficit” (so called because oil and services trade have little to do with the terms of U.S. trade agreements and other trade policy decisions) has been rising at a considerably slower pace this year (the aforementioned 4.04 percent rate) compared with last – when the January-through-October increase was 12.74 percent.
>Total U.S. exports dipped by 0.21 percent in October, from $207.55 billion to 207.12 billion – their lowest level since April’s $206.87 billion.
>Total U.S. exports are down 0.04 percent year-to-date – compared with a 7.45 percent rise between the preceding January-through-October period.
>”Made in Washington” exports are down 1.35 percent year-to-date, with October’s monthly $119.96 billion total the lowest since October, 2017’s $118.19 billion. Between the first ten months of 2017 and the first ten months of 2018, they grew by 5.98 percent.
>”Made in Washington” imports are up 0.55 percent year-to-date, with October’s monthly $187.54 billion total the lowest since November, 2017’s $186.99 billion. Between the first ten months of 2017 and the first ten months of 2018, they climbed by a much faster 8.26 percent.
>The also chronic and huge U.S. manufacturing trade deficit rose by 5.45 percent between September and October – from $87.91 billion to $92.70 billion. The increase followed two straight sequential declines.
>Manufactures exports in October improved by 5.03 percent, from $91.84 billion to $96.45 billion. But the much larger amount of manufactures imports increased by a faster 5.23 percent, from $179.75 billion to $189.15 billion.
>Year-to-date, the manufacturing trade deficit is up 2.76 percent, from $847.21 billion to $870.62 billion. That’s a much slower rate of increase than the 11.26 percent rise between January-through-October, 2017 and the same 2018 period.
>Interestingly, the safety woes of longtime manufacturing export superstar didn’t weigh heavily on the industry’s latest trade figures. Exports of civilian aircraft actually edged up sequentially in October – from $3.29 billion to $3.33 billion. Imports rose more, from $1.35 to $1.60 billion, but the result contributed only $210 million to the $4.79 billion monthly rise in the total manufacturing trade deficit.
>Longer term, though, it’s a much different story. For the first ten months of this year, civilian aircraft exports have decreased from $46.03 billion to $37.21 billion. Import, however, are up from $10.06 billion to 12.16 billion.
>As a result, the civilian aircraft trade surplus is down on a year-to-date basis from $35.97 billion to $27.15 billion. And this $8.82 billion drop-off represents 37.68 percent of the $23.41 billion worsening of the overall manufacturing trade balance so far from 2018 to 2019. Moreover, it’s a far cry from the days when the civilian aircraft sector was strengthening the U.S. manufacturing trade balance.
It’s true that when examining the improvement of trade performance on an absolute or relative basis, the economy’s growth rate has to be taken into account. In this vein, though, the rates of improvement are all significantly faster than the slowdown being experienced by the wider economy. That development doesn’t lend itself to pithy headlines (or catchy campaign slogans). But by any reasonable standard, it’s solid progress.