America’s goods and services trade deficit decreased by 5.93 percent in June – a second straight sequential decline that resulted in its lowest level ($43.64 billion) since last October. Highlighting the month’s results was an all-time high services exports figure ($65.37 billion). In addition, total exports hit their highest level ($194.37 billion) since the end of 2014, and June goods exports to Mexico ($21.35 billion) were the second greatest total on record, and the merchandise deficit fell on month at its fastest pace (18.28 percent) since July, 2015.
Yet despite these milestones, the total trade deficit for the first half of the year ($276.60 billion) was the highest six-month total since the first six months of 2012. Further, goods exports to China – which accounts for roughly half of the total American merchandise trade deficit – fell in June at their fastest rate (4.74 percent) since January, 2016 (18.41 percent). And although the China-heavy manufacturing and high tech trade deficits fell on month, they are running ahead of last year’s totals as well. Indeed, the latter’s six-month total ($43.40 billion) represents an all-time high. Year-to-date merchandise shortfalls have risen – including a quadrupling of the Canada shortfall – with many of the foreign economies whose trade policies have been criticized by President Trump. (Germany and South Korea were important exceptions).
The June figures also showed a quarterly uptick in the drag on the current recovery of the Made in Washington portion of the U.S. trade deficit from an already lofty level – cutting 17.47 percent from cumulative growth since the expansion began in mid-2009, or just under $464 billion.
Here are selected highlights of the latest monthly (June) trade balance figures released yesterday morning by the Census Bureau:
>In June, the combined U.S. goods and services trade deficit dropped for its second straight month, from a downwardly revised $46.39 billion to $43.64 billion. The new total brought the shortfall to its lowest level since last October ($43.07 billion).
>Leading this progress were U.S. services exports, which rose on month by 0.94 percent to a a second straight new all-time high: $65.37 billion.
>Total exports hit something of a milestone, too, increasing by 1.23 percent sequentially to their highest level ($194.37 billion) since December, 2014 ($197.18 billion).
>Moreover, on the eve of the renegotiation of the North American Free Trade Agreement, the June data show that U.S. goods exports to NAFTA partner Mexico improved by 7.42 percent over May’s figure, to hit their second highest total ($21.35 billion) on record. (The all-time high of $22.35 billion was set in August, 2014).
>Yet in contrast to this good news, the combined American trade deficit for the first six months of the year ($276.60 billion) was the worst January-June total since 2012’s $281.46 billion – when economic growth was somewhat faster.
>Another June low-light: China, which may face punitive unilateral U.S. tariffs, bought 4.74 percent few goods from the United State than in May – the steepest such drop since January, 2016’s 18.41 percent.
>U.S. merchandise imports from China, however, rose by 1.17 percent, to $42.29 billion, and helped push the June American deficit up 3.08 percent, to $32.58 billion – the highest since last August’s $33.86 billion.
>Year-to-date, the U.S. goods deficit with China is running 6.08 percent ahead of last year’s pace, even though exports have risen nearly twice as fast (up 15.63 percent) than imports (8.39 percent).
>Although it fell on month in June (by 6.83 percent, to $8.82 billion), on a year-to-date basis, the trade deficit for high tech goods for the first half of this year set its own new record for the January-June period – $43.40 billion.
>In fact, this shortfall is up 33.37 percent from the previous January-June period.
>Between the first half of last year and the first half of this year, U.S. High tech exports inched up by only 0.36 percent, but imports have climbed 5.66 percent.
>A similar story unfolded in manufacturing. The trade gap fell 4.93 percent on a monthly basis, from $80.10 billion in May (the second highest total ever) to $76.13 billion.
>Manufacturing exports rose 2.98 percent on month, while imports dipped by 0.70 percent.
>Year-to-date, however, the manufacturing trade deficit is running 6.19 percent ahead of last year’s record pace, which resulted in an $853.07 billion 12-month total.
>Manufacturing exports are up 3.86 percent for the January-June period, but imports have grown by 4.98 percent.
>Mexico represents another example of a country criticized by President Trump whose merchandise trade surplus with the United States shrunk sequentially but has risen on a year-to-date basis.
>Thanks largely to those robust American goods export figures, the U.S. goods deficit with Mexico sank by fully 18.28 percent month-to-month – the fastest rate since July, 2015 (43.12 percent). American goods purchases from Mexico rose by only 0.52 percent over June’s levels.
>Year-to-date, however, the U.S. merchandise shortfall with Mexico is up by 13.26 percent, as goods exports have risen by 5.04 percent, but imports have grown by a faster 6.86 percent.
>An even more extreme example is provided by Canada, with which U.S. goods trade flows have been exceptionally volatile, albeit in the context of a balance that has become notably modest.
>In June, the American merchandise deficit with Canada nosedived by 54.42 percent. The decrease was only from $1.37 billion to $624 million in absolute terms, but that’s still the lowest Canadian goods surplus since June, 2016.
>On a monthly basis, U.S. goods exports to Canada improved by 1.11 percent, and imports fell by 1.77 percent.
>Between the first six months of this last year and this year, however, the U.S. goods deficit with Canada has more than quadrupled, from $2.20 billion to $10.51 billion. American merchandise exports have advanced by 3.94 percent, but imports rose by nearly twice as fast – 9.95 percent.
>Indeed, the American goods shortfall with its partners in NAFTA (the North American Free Trade Agreement), which will soon be renegotiated by the three signatories, dropped by 24 percent month-to-month in June, from $8.66 billion to $6.58 billion, on an export increase of 3.91 percent and an import dip of 0.61 percent.
>Year-to-date, however, this deficit has surged by 36.68 percent, from $34.24 billion to $46.79 billion, as U.S. goods sales to Mexico and Canada combined have improved by 4.44 percent, but purchases from the two grew by 8.36 percent.
>Yet U.S. goods trade with Germany has shown a reversal of this pattern. In June, the American merchandise deficit rose by 10.03 percent, from $4.99 billion to $5.49 billion. U.S. exports increased by a mere 0.18 percent, while imports were up by 5.36 percent.
>The American goods deficit with Germany on a year-to-date basis, however, has decreased by 5.48 percent, as U.S. merchandise sales to Germany have advanced by 7.04 percent, while purchases from Germany have slipped by 0.1 percent.
>U.S. goods trade with South Korea followed this pattern, but with bigger disparities between the on-month and on-year data. Sequentially in June, the American merchandise deficit jumped by 26.23 percent, from $1.46 billion to $1.85 billion. U.S. merchandise sales to South Korea were off 5.96 percent, but American goods imports increased by 1.95 percent.
>Yet between January-June, 2016 and January-June, 2017, this American merchandise deficit cratered by 31.91 percent, from $16.46 billion to $11.20 billion. U.S. goods exports to South Korea surged by 21.82 percent during this period, while imports slid by 2.38 percent.
>At the same time, on a monthly basis, the American merchandise trade deficit with South Korea has more than tripled (from $561.4 billion) since the bilateral trade agreement went into effect in March, 2012.
>The June trade figures make clear that the drag on American growth exerted by the Made in Washington portion of the U.S. trade deficit grew slightly between the first and second quarters of this year – from an already considerable level.
>This deficit consists of U.S. trade flows heavily influenced by trade agreements and other trade policy decisions – thus omitting services and oil trade – that are then adjusted for inflation.
>Between the second quarter of 2009 – when the current recovery officially began – and the first quarter of 2017, the increase in this Made in Washington deficit has cut cumulative U.S. growth by 17.40 percent, or $443.24 billion out of $2.5476 billion in real GDP expansion.
>As of the second quarter of 2017, this drag effect increased to 17.47 percent, or $463.97 billion out of $2.6551 billion in real GDP expansion.
