Last Friday, RealityChek launched its midyear 2000 review of U.S. trade flows – which speaks volumes about which parts of the economy have held up best and have been hit harrdest by the CCP Virus. Today, following that post’s look at the goods sectors that have racked up the biggest trade surpluses and deficits between January and June, 2019, and this January and June, we’ll examine which industries have seen their trade balances improve and worsen the most during this period, and how these lists compare with those of full-year 2019.
Three big takeaways here: First, in contrast to the lists of biggest trade surplus and deficit sectors presented last week, which featured surprisingly little change on a year-to-date basis, the lists showing the sectors where the biggest changes in trade balances took place revealed enormous turnover.
Second, although a majority of the industries that saw the greatest improvements in their trade balances were already running trade surpluses, a significant number (seven of the 22 that could be counted in this way) were industries running deficits. (Because figures for crude oil and natural gas are now reported separately, as opposed to being lumped together, no such conclusion was possible for them.) Even better, one sector – miscellaneous metal containers – turned its deficit into a surplus. One plausible interpretation is that most of the most globally competitive industries in the nation have retained competitiveness so far during the pandemic, and some have improved lagging competitiveness. All the same, clearly at work here, especially concerning the sectors whose deficits have shrunk markedly, are virus-related effects that may be relatively short-lived.
Third, although most of the 21 parts of the economy whose trade balances deteriorated the most were industries already in deficit – indicating that sectors in competitive trouble pre-CCP Virus remain in such trouble – eight were running trade surpluses. That pattern indicates that the virus has damaged them.
One methodological point that needs to be made right away: These “Top 20” lists both contain more than 20 entries because of confusion caused by apparent duplication for aerospace-related sectors in the government industry classification system I’ve used. So I decided to present any aerospace data that the government figures indicate belong in these Top 20s, but also added other sectors to maximize the odds that each list contains 20 sectors that truly qualify.
But before getting too deeply into the methodological weeds, here’s the list of the Top 20 sectors that generated the greatest improvements in their trade balances between the first six months of 2019 and the first six months of 2020, along with the percentage changes. And as mentioned above, their ranking on the comparable full-year 2019 list is included. Industries that didn’t make that 2019 list are indicated with a hyphen. Industries in surplus and deficit are identified with Ss and Ds, respectively.
biggest trade balance improvers 2019 rank
1. miscellanous metal containers: $91m deficit to $72m surplus –
2 miscellaneous grains: +503.71 percent – S
3. semiconductor production equipment: +245.18 percent – S
4. iron ores: +234.48 percent – S
5. electronic connectors and parts: +144.56 percent – S
6. gaskets, packing and sealing devices: +103.91 percent – S
7. semiconductors: +86.87 percent 1 S
8. animal fats and oils: +82.00 percent 8 S
9. crude oil: +60.24 percent (new category)
10. misc measuring & control devices: +54.06 percent – S
11. heavy duty trucks and chassis: +48.74 percent – D
12. aircraft parts & auxiliary equipment: +43.89 percent – D
13. specialty canned foods: +42.37 percent 20 S
14. cheese: +40.06 percent 13 S
15. misc non-ferrous smelted metals: +37.01 percent – S
16. construction machinery: +36.34 percent – D
17. peanuts: +36.12 percent – S
18. autos and light trucks: +35.76 percent – D
19. aircraft engines and engine parts: +35.55 percent – D
20. iron and steel products: +34.99 percent – D
21. male cut and sew apparel: +33.37 percent – D
22. pulp mill products: +33.16 percent – S
Let’s return to the methodology briefly. All the statistics in these mid-year trade posts cover goods industries. Service industries are left out because the government database I rely doesn’t report on the latter, and because comparably detailed data won’t be released for a while.
This database is maintained by the the U.S. International Trade Commission, which enables users to access them with its terrific Trade Dataweb interactive search engine. The specific goods categories used are those of the North American Industry Classification System (NAICS) – the federal government’s main way to slice and dice the U.S. economy. And the level of disaggregation I’m using is the sixth, since it’s the level at which you can keep the numbers of sectors analyzed manageable, and at the same time make distinctions between final products on the one hand, and their parts and components on the other (vitally important given much more specialized manufacturing has become).
Aside from the substantial degree of turnover, one prominent feature of this list is its domination by intermediate goods. Parts, components, and materials used in the production of final manufactured goods, or the machinery used in that production, account for 15 of these 22 sectors. Perhaps it’s a sign that global supply chains have proven more resilient during the pandemic than is commonly supposed, and that U.S. links on these chains have been performing exceedingly well?
In addition, 17 of the 22 are manufacturing industries, compared with 16 of the 20 on last year’s list. That’s a step backward for fans of U.S.-based manufacturing, but not a big one.
Nevertheless, two of the sectors that have improved their trade balances most are in the aerospace sector, and regardless of classification issues, since both those industries are deficit industries, their performance undoubtedly reflects both the drastic reductions in air travel imposed due to the CCP Virus (which affect orders for imported engines, their parts, and other parts)nd these goods), as well as the troubles at Boeing, which also reduce demand for foreign-made inputs.
A third deficit manufacturing sector – men’s and boy’s apparel – has also surely seen its trade shortfall shrink because American consumers are buying so few of these largely foreign-made goods. (In an upcoming post looking at export and import changes, we’ll see if this domestic demand-related hypotheses holds any water.)
Now it’s time for the list of those sectors in which trade balances worsened the most.
biggest trade balance losers 2019 rank
1. misc non-ferrous extruded metals: -1,354.67 percent 7 D
2. smelted non-ferrous non-alum metals: -1,254.08 percent 1 D
3. farm machinery and equipment: -404.19 percent – D
4. miscellaneous textile products: -399.55 percent – D
5. computer storage devices: -271.11 percent – D
6. jewelry and silverware: -98.97 percent – D
7. non-diagnostic biological products: -61.67 percent 16 S
8. computer parts: -60.12 percent – S
9. misc electrical equipment/components: -50.76 percent 15 D
10. misc apparel & apparel accessories: -46.82 percent – D
11. non-anthracite coal/petroleum gases: -44.91 percent – S
12. cyclic crude & intermediate products: -40.48 percent – S
13. motor vehicle bodies: -39.49 percent – S
14. computer storage devices: -39.07 percent – D
15. civil aircraft, engines, equip, parts: -36.95 percent – S
16. medicinal/botanical drugs/vitamins: -28.40 percent – D
17. perfumes, makeup, and toiletries: -28.19 percent – S
18. communication and energy wire: -25.63 percent – D
19. power distribn/specialty transformers: -24.03 percent – D
20. misc electronic components: -23.92 percent – D
21. corrugated & solid fiber boxes: -23.61 percent – S
Turnover here has been even greater than on the improvers’ list, with only four of the 21 sectors appearing on the full-year, 2019 list. And talk about manufacturing-heavy! Industry represents all of the sectors save one (non-anthracite coal and petroleum gases). That’s more than the 17 of 20 on the full-year 2019 list of trade deficit growers.
Moreover the dominance of intermediate goods industries (only four of the 20 manufacturing sectors – medicinal and botanical drugs and vitamins; perfumes, makeup, and toiletress, apparel and apparel accessories’ and jewelry and silverware) looks like evidence that not all such U.S. supply chain-related sectors have performed relatively well during the pandemic.
But neither actual deficits and surpluses nor how they’ve changed tell the whole story about the CCP Virus’ impact on American trade flows and competitiveness. The export and import flows that comprise them need to be examined, too, and they’ll both be coming up on RealityChek.