If you’re in the market for (still more) signs of how weird the American economy remains as it emerges from the CCP Virus pandemic, last week’s latest official U.S. trade figures (for August) are just the ticket.
Among other results, they showed astronomical monthly deficits for the nation’s manufacturing-heavy China trade, and for industry as a whole – along with passage of industry’s cumulative trade gap this year beyond the trillion-dollar mark, and toward a fifth straight year of annual shortfalls exceeding this level.
But as reported in the latest official figures, domestic manufacturing keeps boosting output and hiring new workers so far anyway – due mainly to the enormous new demand for manufactured goods from everywhere created by the unprecedented stimulus still coursing through the economy.
Less encouragingly, even though the overall trade deficit fell again sequentially, total exports retreated for the first time in seven months. Combined goods and services imports fell, too – with these two developments suggesting that the gap is now beginning to narrow not because U.S. growth is becoming healthier (which would be the case if exports were expanding and imports decreasing), but because the economy is weakening – and maybe heading into a recession.
More specifically, the total trade deficit sank by 4.34 percent on month in August, from $70.46 billion to $67.40 billion. The sequential decrease was the fifth in a row (the longest such stretch since May-November, 2019) and the level the lowest since May, 2021’s $66.33 billion.
The aforementioned combined goods and services exports decrease was modest – just 0.26 percent. And the monthly total – $258.92 billion – was still the second highest on record. It was all the more noteworthy given the continuing rapid rise in the value of the U.S. dollar, which undercuts the price competitiveness of American-origin products and services the world over.
Overall imports were down for the third straight month – the longest such streak since the five-month stretch from December, 2019 to May, 2020, during the pandemic’s first wave – and decreased by 1.04 percent. So we’re hardly talking about a collapse.
The trade deficit in goods – which make up the vast majority of U.S. exports and imports – also shrank for the fifth straight month in August, and this streak also was the longest since May-November, 2019. Having fallen by 3.74 percent from $91.07 billion to $87.64 billion, this shortfall is now the smallest since October, 2021’s $86.23 billion.
Goods exports were off for the second straight month, slumping 0.36 percent, from a record $183.26 billion to $182.50 billion. But the total was still the third highest ever.
Goods imports decreased for the third straight month (the longest such stretch since pandemic-y December, 2019 to May, 2020, too), and fell by 1.49 percent, from $274.23 billion to $270.14 billion.
The nation’s long-time services trade surplus, however, narrowed in August for the first time in three months – by 1.82 percent, from $20.62 billion to $20.24 billion.
Services exports were fractionally lower, but the $76.42 billion total remained an all-time high for all intents and purposes.
Services imports climbed by 0.66 percent, from $55.81 billion to $56.18 billion – the third highest monthly level on record (after June’s $57.09 billion and May’s $56.41 billion).
It’s easy to conclude that the August drop in the overall trade deficit was entirely an energy story. And indeed, while the combined goods and services shortfall stood at $3.06 billion, the monthly improvement in the petroleum balance ($2.27 billion) and in the natural gas surplus ($1.09 billion), was slightly greater.
But significant movement came in other sectors of the economy as well. As indicated above, the chronic and huge deficit in manufacturing became huge-er, jumping 7.87 percent, from $122.09 billion to $131.71 billion – the third highest monthly total ever (after March’s $142.22 billion and May’s $132.60 billion).
Strikingly defying that high dollar, manufacturing exports improved by 3.50 percent, from $109.50 billion to $113.34 billion – the second best total ever after June’s $114.78
But the much greater volume of manufacturing imports also hit their second highest level on record (behind March’s $256.18 billion) after increasing from $231.59 billion to $245.05 billion.
The August data brought this year’s manufacturing deficit to $1.01033 trillion, and it’s running 19.37 percent ahead of last year’s annual record pace.
Since China accounts for so much of U.S. manufacturing trade, it’s no surprise that in August, the American goods deficit with the People’s Republic surged by 8.85 percent, from $34.40 billion to $37.44 billion.
U.S. goods exports to China expanded on month by 5.22 percent – from $12.27 billion to $12.91 billion. But goods imports from China are about four times greater, and they rose faster – by 7.90 percent, from $46.66 billion to $50.35 billion. That was the second highest total ever, after October, 2018’s $52.08 billion, when Chinese exporters and U.S. importers were scrambling to conclude transactions before former President Donald Trump’s tariffs came into force.
On a year-to-date basis, the China goods deficit is now up 25.23 percent – considerably faster than its closest global proxy, the non-oil goods deficit (19.33 percent). That could indicate that whatever the impact of the Trump tariffs, it’s faded.
But the story becomes much more complicated after examining the separate export and import flows. Year-to-date, goods imports from China have risen faster (18.31 percent) than their global non-oil goods counterparts (16.94 percent). But the difference isn’t all that big, especially considering China’s still formidable worldwide competitiveness edge in so many industries.
What is all that big is the difference on the China import side. U.S. foreign sales of non-oil goods have increased by 15.31 percent so far ths year. But goods exports to China edged up by just 2.43 percent. Since China’s economy this year is widely expected to grow about as fast as the global economy, clearly something wrong and indeed quite protectionist is going on. Time for some new U.S. tariffs in response, I’d say.