(What’s Left of) Our Economy: A U.S. Trade Figures Update with a Special Focus on China & Trump “Foe” EU

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Canada, China, EU, European Union, exports, goods trade, high tech goods trade, imports, manufacturing, merchandise trade, services trade, tariffs, Trade, Trade Deficits, trade surpluses, Trump, {What's Left of) Our Economy

The May U.S. trade figures are no longer exactly new, having been released July 6. But with a big round of U.S. tariffs just imposed on China, and many more possibly on the way (along with automotive trade curbs that would affect most major U.S. economic competitors), they’re still incredibly newsy. So here’s a quick rundown of some highlights closely related to recent headlines, starting with the China figures.

>The enormous American goods trade deficit with China shot up by 18.68 percent sequentially, from $27.96 billion to $33.19 billion. The May shortfall was the biggest since January ($35.95 billion) and the increase was the greatest since May, 2016 (19.49 percent).

>The widening of the trade gap was largely driven by a 14.56 percent monthly jump in U.S. merchandise imports from China, to $43.80 billion.

>That level was also the highest since January ($45.79 billion) and the increase was the biggest since March, 2015 (30.33 percent).

>U.S. goods exports to China rose on month by only 1.69 percent, to $10.61 billion.

>Year-to-date, the merchandise deficit is running 9.92 percent higher than last year’s rate – which resulted in a record $375.58 billion bilateral shortfall.

>Also, year-to-date, U.S. goods exports to China have increased by 7.79 percent, while the far larger amount of imports is up by 9.36 percent.

>The trade figures for another competitor in President Trump’s cross-hairs, the European Union (EU) tell a different story. In May, the goods trade deficit with this grouping – labeled a trade “foe” by Mr. Trump – declined by 8.57 percent, from $14.64 billion to $13.39 billion.

>U.S. merchandise exports to the EU advanced by 4.34 percent sequentially in May, to $27.97 billion, and American sales to the group have been improving steadily since November. Indeed, on a year-to-date basis, they’ve improved by a healthy 14.02 percent.

>The merchandise deficit, however, has risen by 14.77 percent year-to-date as of May, with the larger amount of imports up nearly as fast: 14.27 percent.

>The U.S. goods deficit with Canada, another country that has drawn Mr. Trump’s ire, nearly doubled on month in May, from $806 million to $1.50 billion. But because this shortfall has fallen to such low levels in recent years, largely because of reduced American energy imports, these figures now tend to be volatile.

>U.S. merchandise exports to Canada – still America’s largest single country trade partner – increased 4.42 percent on month in May, to $26.81 billion, while goods imports rose by 8.53 percent, to $28.31 billion

>But although that import figure was the highest such monthly total since December, 2014’s $28.83 billion, the year-to-date American bilateral merchandise deficit has plummeted by 40.78 percent, from $9.78 billion to $6.08 billion.

>U.S. goods exports to Canada year-to-date are up by 4.98 percent, as of May, and goods imports have risen by 6.02 percent.

>U.S. global trade flows set a series of multi-month bests and all-time records in May.

>The combined May goods and services deficit fell by 6.57 percent sequentially to $43.05 billion – the lowest such total since October, 2016’s $42.64 billion.

>The goods deficit declined by 3.77 percent on month to $65.79 billion – the lowest since last August’s $65.49 billion.

>On the services side, the May surplus of $22.74 billion bested the April result by 2.04 percent, and fell just short of the record $22.77 billion recorded in February, 2015.

>Total exports, which rose sequentially by 1.94 percent, to $215.33 billion, hit their fourth straight monthly record.

>U.S. goods exports, which increased on month by 2.62 percent, to $144.89 billion, set their third straight such record.

>U.S. services exports, which advanced by 0.56 percent, to $70.44 billion, set their 13^th straight monthly record.

>U.S. non-oil goods exports (pre-inflation) in May climbed by 2.75 percent on month, to $129.98 billion, and set their third straight monthly record.

>U.S. current dollar oil exports inched up by 0.77 percent sequentially in May, to $14.18 billion – the second best performance on record after December, 2013’s $14.27 billion.

>The immense American manufacturing trade deficit in May continued its march toward the $1 trillion-dollar annual mark, and a new yearly record.

>The May manufacturing trade deficit totaled $85.05 billion – its fourth all-time highest, and an increase of 8.95 percent sequentially.

>Manufactures exports improved on month by 4.89 percent, from $96.72 billion to $101.45 billion. But the much greater amount of manufactures imports increased even more – by 6.71 percent, from $174.79 billion to $186.50 billion.

>Year-to-date, the manufacturing trade shortfall reached $397.48 billion in May – 11.89 percent higher than the comparable level in 2017, when the gap finished the year at $929.14 billion.

>Year-to-date manufacturing exports have increased by 7.38 percent, but imports are 9.27 percent higher.

>America’s trade deficit in advanced technology products also keeps heading to a new annual record.

>On month, the chronic shortfall in this category rose by 8.44 percent, to $10.32 billion.

>That increase brought the year-to-date deficit to $45.37 billion –32.62 percent higher than the comparable total last year, when this full-year trade gap reached $110.93 billion.

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(What’s Left of) Our Economy: The First Quarter Trade Deficit Kept Rising, & its Growth Rate Kept Falling

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exports, GDP, Great Recession, imports, inflation-adjusted growth, Made in Washington trade deficit, real exports, real GDP, real growth, real imports, real trade deficit, recovery, trade deficit, {What's Left of) Our Economy

For the second straight time, a higher estimate of the inflation-adjusted trade deficit weakened the real U.S. growth figure for the first quarter. According to the final (for now) read for the first quarter, the constant dollar trade shortfall was $656.8 billion – higher than the $650.9 billion reported in the previous growth figure for the first quarter. And partly because this increase turned net trade into a minor (0.04 percentage point) drag on growth, the quarter’s real GDP increase was marked down from a 2.16 percent annualized improvement to 1.98 percent.

Moreover, the new after-inflation trade deficit remained the second highest such quarterly figure since the $703.2 billion recorded for the third quarter of 2007 – just before the Great Recession began. It was also slightly higher the final (for now) fourth quarter level of $653.9 billion.

As with the second GDP report for the first quarter, the quarterly records for total exports and goods exports remained intact, but declined from the levels previously reported. The after-inflation services export figure, however, came in higher (at $690.8 billion on an annual basis) – and represented a new record as well. All of the latest import figures were upgraded from their previously reported record levels – the same pattern as with the first quarter’s second GDP report. Similarly, the sequential slowdowns in the growth of total imports and goods imports were not quite as great as previously reported (76.49 percent as opposed to 79.17 percent, and 83.99 percent versus 86.21 percent, respectively). But they were still the greatest such slowdowns since the fourth quarter of 2010 and the first quarter of 2009, respectively. The latter date came at the depths of the Great Recession.

Trade’s substantial drag on cumulative growth during the current U.S. recovery became heavier, according to the new GDP figures – reducing real growth by 9.99 percent ($301.2 billion), not the 9.41 percent reported in the second read. This trade drag was also up from the fourth quarter’s 9.82 percent ($287.6 billion). But the much larger hit to growth from the recovery-era increase in the Made in Washington deficit (which consists of trade flows impacted greatly by U.S. trade policy) actually decreased sequentially – from 18.38 percent of that cumulative growth ($538.81 billion) to 17.37 percent ($523.88 billion).

Here are the trade highlights from Thursday morning’s final (for now) report on first quarter GDP growth from the Commerce Department:

>The Commerce Department’s final read on gross domestic product (GDP) in the first quarter of this year revealed that America’s trade performance depressed the initially reported inflation-growth figure for the period for the second straight time.

>Partly because this latest estimate judges that the quarter’s after-inflation annualized trade gap was actually $656.8 billion rather than $650.9 billion, the period’s annualized growth figure was reduced from 2.16 percent to 1.98 percent.

>The constant dollar trade shortfall estimate was also (0.44 percent) higher than the fourth quarter of 2017’s $653.9 billion – and replaced it as the second highest such figure since the $703.2 billion during the third quarter of 2007 – just before the Great Recession began.

>Moreover, whereas the previous estimates pegged net trade as a minor contributor to growth during the first quarter (according to the second read, fueling 0.08 percentage points of the 2.16 percent real annualized growth), this final read determined that trade subtracted 0.04 percentage points from the lower 1.98 percent real annualized growth.

>As with the previous report on first quarter growth, levels of inflation-adjusted total exports and goods exports remained at record levels in the latest GDP data, but came in slightly lower than initially reported. Yet real services trade broke this pattern, as a higher export estimate lifted their new quarterly record higher.

> Real total exports are now judged to have been $2.2496 billion annualized, not the $2.2529 trillion estimated in the second first quarter read. As a result, the sequential increase on an annualized basis was 0.89 percent, not 1.04 percent.

>The new real total export total nonetheless remained the category’s fifth straight quarterly record.

>Real goods exports are now judged to have been $1.5622 trillion on an annual basis, not the $1.5696 trillion previously reported. As a result, the annualized sequential increase was 0.85 percent, not the 1.32 percent previously reported.

>But this too was a fifth straight quarterly record.

>Real services exports – the exception to the pattern – are now judged to have been $690.8 billion annualized, not the$687.4 billion previously reported. As a result, the annualized sequential increase was 0.96 percent, not 0.60 percent, and this category’s record performance improved further.

>On the import side, the pattern displayed in the previous read – quarterly records remaining intact but at lower levels – was repeated for all major categories.

>The first quarter’s total real import figure has now been revised up from $2.9038 trillion on an annual basis to $2.9065 billion. As a result, the sequential increase is now 0.79 percent, not 0.70 percent. The new total is still a second straight quarterly record.

>The goods imports total is now estimated at $2.4015 trillion annualized, up from $2.3985 trillion figure previously reported. As a result, the sequential growth is 0.65 percent, not the 0.56 percent previously reported, but the level is still a second straight quarterly record, too.

>Real services imports for the first quarter are now estimated at $503.3 billion annualized, not the $502.9 billion previously reported. As a result, their sequential growth is now 1.43 percent, not the 1.35 percent previously reported. But this new total is a record, too.

>Also as with the previous GDP report, the new figures show that both the total imports and the goods imports constant dollar sequential growth rates have experienced their biggest sequential slowdowns in years – though these slowdowns are now judged to be slightly more modest.

>Total real imports grew at a 0.79 percent quarter-to-quarter rate in the first quarter – faster than the previously reported 0.70 percent. But compared with the fourth quarter’s 3.36 percent rate, its still 76.49 percent lower – and it’s still the biggest such change since the 81.87 percent reported for the fourth quarter of 2010.

>Inflation-adjusted goods imports grew sequentially in the first quarter by 0.65 percent, not the 0.56 percent rate previously reported. But that rate was still 83.99 percent lower than the fourth quarter’s 4.06 percent – and the biggest such change since the 87.63 percent drop in the first quarter of 2009 – near the low point of the Great Recession.

>The upwardly revised first quarter real trade deficit figure increased the growth drag created by the increase in this shortfall during the current economic recovery.

>As of the previous GDP read, the real trade deficit’s widening since mid-2009 – when the current recovery began – reduced cumulative growth by 9.41 percent, or $284.6 billion.

>As of the latest GDP report, these figures have risen to 9.99 percent, and $301.2 billion.

>The new first quarter figures are also higher than the fourth quarter figures: 9.82 percent and $287.6 billion, respectively.

>The growth drag of the increase in the Made in Washington trade deficit – which focuses on the non-oil goods trade flows most heavily influenced by trade agreements and other trade policies – has been much greater during the recovery.

>The previous first quarter read pegged this growth drag at $535.09 billion – which had cut the recovery’s cumulative constant dollar GDP increase by 18.26 percent.

>The new read actually reduced the growth drag to 17.37 percent – or $523.88 billion in lost growth.

>And the new figures are also smaller than those for the fourth quarter – 18.38 percent, and $538.81 billion.

(What’s Left of) Our Economy: Higher Trade Deficit Pulls Down First Quarter U.S. Growth Rate

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exports, GDP, gross domestic product, imports, Made in Washington trade deficit, real GDP, real trade deficii, recovery, Trade, trade deficit, {What's Left of) Our Economy

The second read on the inflation-adjusted first quarter gross domestic product (GDP) revealed that the slight growth slowdown (from a 2.30 percent annualized increase to 2.16 percent) was driven by a higher trade deficit figure ($650.9 billion annualized) than initially reported ($645.9 billion annualized). This figure – though still lower than the fourth quarter’s $653.9 billion – remained the second highest price-adjusted quarterly trade shortfall since the $703.2 billion total reported for the third qurter of 2007 – just before the onset of the Great Recession.

The quarterly records for all major import and export figures remained intact in the new data, but all of the latest export totals came in slightly lower, and all of the latest import figures came in slightly higher. At the same time, the sequential slowdowns in the growth of total imports and goods imports (79.17 percent and 86.21 percent, respectively) remained the greatest since the first quarter of 2011 and the first quarter of 2009, respectively. The latter date came at the depths of the Great Recession.

The new GDP figures showed that trade’s drag on cumulative growth during the current recovery remained substantial – and the first quarter total (9.41 percent) was slightly higher than the initially reported 9.23 percent. As a result, though, this trade drag was down somewhat from the 9.82 percent it hit as of the fourth quarter of last year. But the subtraction from cumulative constant dollar economic growth was still an impressive $535.09 billion.

Here are the trade highlights from this morning’s second report on first quarter GDP growth from the Commerce Department:

>The Commerce Department’s second read on gross domestic product (GDP) in the first quarter of this year revealed that a higher quarterly inflation-adjusted trade deficit than initially estimated helped bring about the slightly lower growth figure contained in the new report.

>The increase in the quarterly trade deficit estimate (from $645.9 billion annualized to $650.9 billion annualized) contributed to the real quarterly growth estimate being reduced from 2.30 percent to 2.16 percent.

>The first quarter figure was lower than the fourth quarter’s $653.9 billion. But it still represented the second highest such trade shortfall since the $703.2 billion reported in the third quarter of 2007 – just before the Great Recession struck.

>Because of this quarterly decline in the after-inflation trade deficit, trade still added to constant dollar economic growth in the first quarter. But the contribution fell from a 0.20 percentage point contribution to 2.30 percent annualized growth to a 0.08 percentage point contribution to 2.16 percent annualized growth.

>Levels of all major categories of real American exports and imports remained at record levels in the latest GDP data. But all of the export figures came in slightly lower than initially reported, and all the import figures came in higher.

> Real total exports are now judged to have been $2.2529 trillion in the first quarter on an annualized basis, not $2.2563 trillion. As a result, the sequential increase on an annualized basis was 1.04 [ercent, not 1.19 percent.

>The new real total export total nonetheless remained the category’s fifth straight quarterly record.

>Real goods exports are now judged to have been $1.5696 trillion in the first quarter on a annualized basis, not $1.5722 trillion. As a result, the annualized sequential increase was 1.32 percent, not 1.49 percent.

>But this too was a fifth straight quarterly record.

>Real services exports are now judged to have been $687.4 billion annualized in the first quarter, not the $688.3 billion previously reported. As a result, the annualized sequential increase was 0.47 percent, not 0.60 percent. The new total, however, was a new record as well.

>The first quarter’s total real import figure has now been revised up from $2.9022 trillion on an annualized basis to $2.9038 trillion. As a result, the sequential increase is now 0.70 percent, not 0.64 percent. The new total is still a second straight quarterly record.

>The goods imports total is now estimated at $2.3993 trillion annualized, up from $2.3985 trillion. annualized represented this category’s second straight all-time quarterly high. As a result, the sequential growth is 0.56 percent, not the 0.52 percent previously reported, but the level is still a second straight quarterly record, too.

>Real services imports for the first quarter are now estimated at $502.9 billion annualized, not the $502.1 billion previously reported. As a result, their sequential growth is now 1.35 percent, not the 1.19 percent previously reported. But this new total is a record, too.

>At the same time, both the total imports and the goods imports growth rates still represent the biggest sequential slowdowns in years.

>Even the slightly higher inflation-adjusted total import growth reported for the first quarter (0.70 percent) was 79.17 percent lower than the fourth quarter’s 3.36 percent. That’s still the biggest such change since the first quarter of 2011 (81.87 percent).

>The slightly higher inflation-adjusted goods import growth reported for the first quarter (0.56 percent) was 86.21 percent lower than the fourth quarter’s 4.06 percent. That’s still the biggest such change since the first quarter of 2009 (87.63 percent) – near the low point of the Great Recession.

>With the modest increase between the initially reported first quarter annualized real trade deficit and today’s figure, trade’s drag on the current economic recovery became even larger.

>As of the latest data, the increase in the after-inflation trade deficit has reduced total real growth since the recovery’s onset in mid-2009 by 9.41 percent, or $284.6 billion. The initial first quarter read produced a figure of 9.23 percent, or $279.6 billion.

>Yet this growth drag is still a bit less than the fourth quarter’s 9.82 percent (or 287.6 billion.

>The growth drag of the increase in the Made in Washington trade deficit – which focuses on the non-oil goods trade flows most heavily influenced by trade agreements and other trade policies – has been much greater during the recovery.

>As of the first quarter, this Made in Washington recovery drag stood at 18.26 percent of cumulative real recovery growth ($535.09 billion). That’s a small improvement over its drag as of the fourth quarter of last year – 18.38 percent of cumulative recovery growth, or $538.81 billion.

(What’s Left of) Our Economy: As Beijing Talks Begin, Lower March U.S. China Trade Deficit Reported – But the Drop Looks Seasonal

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Canada, Census Bureau, China, EU, European Union, exports, high tech goods trade, imports, Made in Washington trade deficit, manufacturing trade deficit, Mexico, NAFTA, North American Free Trade Agreement, recovery, South Korea, Trade, trade deficit, {What's Left of) Our Economy

The onset of top-level U.S.-China trade talks in Beijing roughly coincided with the release of the March monthly U.S. trade figures, which showed that the monthly American merchandise deficit fell to its lowest level ($25.88 billion) since the previous April ($27.63 billion). Nonetheless, this new figure was the second biggest such total for March on record, behind 2015’s $31.24 billion. In addition, the U.S. goods deficit with China is still running 15.52 percent ahead of 2017’s record yearly rate.

Partly as a result of the China improvement, the combined U.S. goods and services trade shortfall in March plunged to its lowest monthly level ($49.86 billion) since last September’s $45.30 billion. And the sequential decline of 15.22 percent was the biggest since the 17.47 percent plunge in March, 2016. March’s totals for combined U.S. exports, goods exports, and high tech goods exports were all monthly records ($208.53 billion, $140.88 billion, and $34.85 billion, respectively). The all-time high in total exports was the third monthly record in the last four months. And the sequential high tech goods gain was a new all-time best (33.95 percent) even for this volatile category.

America’s merchandise trade with Canada racked up its largest monthly surplus on record ($306.1 million), but the U.S. goods deficit with its other NAFTA trade partner, Mexico, jumped to its biggest monthly total ever ($8.05 billion). Amid trans-Atlantic wrangling over American metals tariffs, new monthly records were also set for U.S. goods exports to and imports from the European Union ($29.85 billion and $41.99 billion, respectively), while the March U.S. goods export figure for South Korea was also the best on record ($5.09 billion).

America’s huge and chronic manufacturing trade deficit rose from $73.21 billion in February to $74.53 billion in March, and stayed on course to exceed $1 trillion this year. The March figure also showed that the drag on the current economic recovery from the growth of the Made in Washington trade deficit – that portion of U.S. trade flows most heavily influenced by trade deals and other trade policy decisions – dipped from 18.37 percent in real terms in the fourth quarter of last year (or $538.38 billion in constant dollars) to 17.66 percent ($535.09 billion in constant dollars) in the first quarter of this year.

Here are selected highlights of the latest monthly (March) trade balance figures released this morning by the Census Bureau:

>As a top-level Trump administration delegation arrived in Beijing for possibly contentious trade talks with China, the Census Bureau reported that the massive American goods deficit with the PRC – whose reduction is a leading on the U.S. goal – fell in March by 11.57 percent to its lowest level ($25.87 billion) since the previous April ($27.63 billion).

>At the same time, because U.S.-China goods trade is strongly influenced by seasonal factors, it was also noteworthy that this new March total was the second highest of all time – behind only 2015’s $31.24 billion.

>In addition, even this latest improvement left the bilateral merchandise shortfall running 15.52 percent ahead of last year’s rate, which produced an annual record of $375.23 billion.

>American goods exports to China jumped by 26.27 percent sequentially in March – the biggest such increase since the 32.70 percent advance in October, 2016 – to reach $12.38 billion.

>U.S. goods imports from China fell sequentially in March for the second straight month, to $38.26 billion. That total was the lowest monthly figure since last May’s $41.80 billion.

>The monthly improvement in goods trade with China helped push the combined U.S. goods and services trade deficit down 15.22 percent sequentially, from an upwardly adjusted $57.74 billion in February to $48.96 billion. The February figure was the highest since October, 2008.

>The monthly drop, moreover, was the biggest since March, 2016’s 17.47 percent.

>U.S. total exports hit a new record in March, with the $208.53 billion figure standing 2.04 percent higher than February’s downwardly revised figure of $204.35 billion. In addition, this was the third all-time monthly total export high achieved in the last four months.

>America’s merchandise exports reached an all-time high in March as well, rising 2.37 percent from February’s downwardly revised $137.13 billion to $140.88 billion.

>Another monthly trade best: high tech goods exports. At $34.85 billion, they were 33.95 percent higher than February’s $26.02 billion. High tech goods trade numbers tend to be volatile, but this advance was the greatest on record.

>Largely as a result, the high tech goods trade deficit sank 23.04 percent on month, from $7.93 billion to $6.11 billion – the second straight post-May, 2017 low.

>High tech imports soared on month in March, too – by 20.64 percent, to $40.96 billion. That was the biggest such increase since last March’s 24.58 percent. And the total was the biggest ever for a March.

>The high tech goods deficit is running fully 33.89 percent ahead of last year’s rate – which resulted in the biggest such shortfall on record.

>U.S. merchandise trade with Canada reached its own milestone in March – the biggest monthly American surplus of all time ($306.1 million). In February, the United States ran a deficit of $404.2 million.

>American goods exports to Canada surged by 15.26 percent on month in March, to $27.10 billion. That was the highest monthly total since October, 2014’s $28.39 billion.

>U.S. goods imports from Canada rose robustly, too – by 12.04 percent, to $26.80 billion. That was their highest monthly total since June, 2015’s $27.34 billion.

>The U.S. merchandise deficit with Canada is running 44.72 percent behind last year’s rate.

>The March trade picture for America’s other NAFTA partner, Mexico, was strikingly different. The U.S. goods deficit of $8.05 billion set a new monthly record.

>U.S. merchandise exports to Mexico rose by 8.31 percent on month, to $21.91 billion (the third highest total on record). But merchandise imports climbed by 13.96 percent, to a new record $29.96 billion.

>The merchandise deficit with Mexico is running 9.01 percent ahead of last year’s pace, which at $71.06 billion was the second highest annual total ever (after 2007’s $74.80 billion).

>Amid continued feuding between the United States and the European Union (EU), America’s merchandise trade deficit with the grouping inched up by 0.82 percent on month in March, from $12.05 billion to $12.15 billion.

>Though this total was far from an all-time high, both U.S. goods exports to and imports from the EU set new monthly records in March – $29.85 billion and $41.99 billion, respectively.

>The 19.51 percent percent monthly export increase was the biggest since March, 2011’s 22.51 percent.

>America’s goods deficit with the EU is running 17.71 percent ahead of last year’s rate, which resulted in the second highest annual figure ever ($151.42 billion, with the record being 2015’s $155.66 billion).

>The U.S. merchandise trade deficit with South Korea soared by 58.61 percent on month in March, to $1.08 billion. But this total was at the low end of the recent range. Moreover, in February, the goods shortfall cratered by 65.28 percent.

>The immense and longstanding American manufacturing trade deficit 73.21 to 74.53

>More notably, American goods exports to South Korea climbed to $5.09 billion – a new all-time high. Further, the 18.53 percent sequential advance was the fastest monthly rate of increase since the previous March’s 22.04 percent.

>U.S. merchandise imports from South Korea rose even faster on month in March – by 23.96 percent, to $6.17 billion. That increase, however, followed a 12.05 percent monthly decrease, repeating a roller-coaster pattern that has been typical for the first quarter of the year.

>Nonetheless, the year-on-year shrinkage of the U.S. merchandise trade gap with South Korea has been impressive – 64.30 percent.

>Volatility has also marked the immense and longstanding U.S. manufacturing trade deficit. After sinking dramatically in February from January’s $86.62 billion (the second highest monthly total on record, following last October’s $88.98 billion), the shortfall rebounded by 1.80 percent – from $73.21 billion to $74.53 billion.

>Manufactures exports increased robustly on month, by 18.56 percent, to $10.5.35 billion. But the far greater amount of manufactures imports rose by 10.99 percent, to $179.88 billion.

>This manufacturing trade gap is now running 13.87 percent ahead of last year’s pace – which produced a record total $927.48 billion annual total.

>As a result, if current trends continue, the manufacturing trade shortfall will top $1 trillion this year.

>The March trade figures permit calculation of the drag exerted as of the first quarter of 2018 on the current American economic recovery of the growth of the Made in Washington trade deficit. This consists of the trade flows, adjusted for inflation, that are most heavily influenced by U.S. trade agreements and similar trade policy decisions – i.e., the nation’s non-oil goods trade.

>As of the fourth quarter of last year, this trade drag had reduced cumulative recovery growth by 18.37 percent, or $538.38 billion in constant dollars.

>In the first quarter of this year, the drag was lower – 17.66 percent, or $535.09 billion in constant dollars.

(What’s Left of) Our Economy: Record U.S. Exports and Imports Mark New U.S. Growth Report – Mainly as the Latter Stagnate

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exports, GDP, Great Recession, gross domestic product, growth, imports, inflation-adjusted growth, Made in Washington trade deficit, real GDP, real trade deficit, recovery, Trade, trade deficit, {What's Left of) Our Economy

According to the advance gross domestic product figures for the first quarter of 2018, all categories of U.S. exports and imports hit new all-time quarterly highs in inflation-adjusted terms and the real quarterly trade shortfall declined sequentially.

The real trade gap, though, was still the second highest annualized quarterly total ($645.9 billion) since the third quarter of 2007 ($703.2 billion) – just before the Great Recession began. Moreover, the constant dollar trade deficit’s 1.22 percent sequential drop-off resulted almost entirely from the greatest sequential slowdowns in the growth of total imports (80.95 percent) and goods imports (87.19 percent) since the fourth quarter of 2010 and the first quarter of 2009, respectively.

Trade continued in the first quarter of 2018 to subtract from cumulative real growth during the current economic recovery, the the drag diminished from the 9.82 percent figure for the fourth quarter of 2017 to 9.23 percent.

Here are the trade highlights from the Commerce Department’s report today on first quarter GDP growth:

>All categories of America’s exports and imports hit all-time highs in the first quarter of 2018 after inflation, according to the Commerce Department’s initial report on the new gross domestic product’s (GDP) growth for that period.

> Real exports totaled $2.2563 trillion on an annualized basis – 1.19 percent higher than the final (for now) level for the fourth quarter of last year, and American overseas sales’ fifth straight quarterly record.

>Real goods exports of $1.5722 trillion annualized topped the fourth quarter total by 1.49 percent – their fifth straight quarterly record as well.

>The first quarter constant dollar services export total of $688.3 billion was a 0.60 percent sequential improvement and a new record itself, but represented a rebound from the fourth quarter’s 0.35 percent sequential dip.

>On the import side, the United States’ total purchases from abroad came to $2.9022 trillion on an annualized basis – up 0.64 percent sequentially and their second straight quarterly record.

>But that growth rate contrasted dramatically with the 3.36 percent sequential increase in last year’s fourth quarter, and indeed was 80.95 percent slower.

>The goods imports total of $2.3985 trillion annualized represented this category’s second straight all-time quarterly high. Yet the 0.52 percent quarterly increase was 87.19 percent slower than the 4.06 percent quarterly rise in last year’s fourth quarter.

>In fact, both these slowdowns were the greatest since the fourth quarter of 2010 and the first quarter of 2009 – the latter a time when the Great Recession was bottoming. In the fourth quarter of 2010, the growth rate of total imports sank by 81.87 percent; in the first quarter of 2009, goods imports plunged sequentially at nearly double (87.63 percent) the rate that they fell in the third quarter.

>Real services imports reached $688.3 billion annualized in real terms in the first quarter, a 0.60 percent advance from the fourth quarter amount and a new record as well.

>The new GDP report revealed that trade remained a considerable drag on the U.S. economy’s after inflation expansion since the current recovery began. But the drag fell from the 9.82 percent of real growth cut by the trade deficit’s increase since the recovery began (in mid-2009), to 9.23 percent.

>In real absolute terms, this means that the trade deficit’s rise sliced cumulative recovery-era inflation-adjusted growth by $287.6 billion as of the fourth quarter of 2017, and by $279.6 billion as of the first quarter of 2018.

>The growth drag of the increase in the Made in Washington trade deficit – which focuses on the non-oil goods trade flows most heavily influenced by trade agreements and other trade policies – has been much greater during the recovery. But the exact numbers for the first quarter won’t be known until the March monthly trade data come out early next month.

>As of the fourth quarter of 2017, though, the increase in this trade deficit in real terms had reduced recovery growth by a 18.38 percent, or $538.81 billion

(What’s Left of) Our Economy: Trump Tariffs Evoke Summers Snake Oil

Tags

Al Gore, China, Clinton administration, current account surplus, Emergency Committee for American Trade, exports, FDI, Financial Times, forced technology transfer, foreign direct investment, General Motors, intellectual property theft, Larry Summers, Obama administration, offshoring lobby, tariffs, Trade Deficits, Trump, {What's Left of) Our Economy

Larry Summers doesn’t like President Trump’s China trade policies – that’s not news. After all, he served in senior economic policy posts both in the Clinton administration, which proudly championed expanded trade with China and laid the groundwork for the PRC’s entry into the World Trade Organization, and in the Obama administration, which less proudly but nonetheless effectively coddled much of the Chinese trade predation (including intellectual property theft) that even most globalization cheerleaders now admit is a major problem.

Newsier are two arguments Summers made yesterday in the Financial Times that indicate how dishonest years of justification of the China trade policies by globalist U.S. administrations have been, and how clueless they remain.

The dishonesty entails Summers’ dismissive treatment of China’s intellectual property “extraction” (as he calls what is usually and rightly recognized as “extortion”) from U.S. and other foreign companies that are forced by Chinese policy into joint venture partnerships with Chinese entities. According to Summers, this form of theft is no big deal for Americans because these episodes

“typically involve cases where the company in question produces for China in China and so have little impact on US employment. In many cases a substantial number of the company’s shareholders are foreign and it pays taxes to many governments. It is more than a little ironic that an administration that condemns outsourcing should make standing up for those who move production to China so central a priority.”

As should be clear to anyone who has followed U.S. trade policy toward China and other offshoring-friendly countries, that’s a heckuva way to describe the outbound American investment that’s been encouraged by the trade deals and related policy decisions enthusiastically supported by Summers and his White House bosses.

For especially during the Clinton years, when so many of these policies were put in place, the construction of American-owned factories, labs, and similar facilities in China was depicted not as activity that would substitute for American exports, or for U.S.-based production (in the form of goods shipped from these factories to the U.S. market), but as activity that would benefit the domestic American economy and its workers by supercharging U.S. exports – which would comprise much of the content of these foreign-made products.

Here’s a typical example from a 1998 report by the (Offshoring Lobby-funded) Emergency Committee for American Trade:

“American companies with global operations ship the large majority — between 60 percent and 75 percent — of total U.S. exports. Their foreign affiliates are important recipients of these exports; their share has increased to over 40 percent today.”

And let’s not forget one of the showcase examples of such Clinton-era investments – General Motors’ 1997 agreement with a Shanghai-run entity to produce autos in China. GM gushed that the joint venture would generate billions in American auto parts exports to China, and the importance attached by the Clinton administration to such deals was made clear by the decision to send Vice President Gore to the PRC to attend the signing ceremony. (Neither GM Chairman John Smith nor Gore mentioned that the agreement’s provisions mandated that the factory achieve 80 percent Chinese content levels within five years.)

Now, according to Summers, these joint ventures don’t significantly benefit the American domestic economy at all. Of course, there’s still the matter of how this Chinese tech theft – including from world-leading U.S. companies in cutting edge industries – will affect America’s innovation and technology futures. But these critical issues don’t seem to be on Summers’ screen.

The author’s cluelessness is evident from his insistence that

“it is wrong to say nothing has been achieved through negotiation with China. Only a few years ago, China’s current account surplus was the largest relative to GDP among significant countries….Today China’s global surpluses are far below past US negotiating targets of a few years ago….”

Here’s the (glaringly obvious) problem. During the current economic recovery, China’s total trade surplus with the United States (including its services deficit) jumped by 75 percent – from $219.47 billion in 2009 to $385 billion in 2016 (the last year for which such figures are available). Can a piece from Summers expressing his astonishment that so many U.S. voters opted in 2016 for a candidate promising to look after “America First” be far behind?

(What’s Left of) Our Economy: February’s Big New U.S. Trade Deficit Driven by Lots of Volatile Internals

Tags

Canada, China, exports, Financial Crisis, Great Recession, high tech goods, imports, manufacturing, Mexico, NAFTA, North American Free Trade Agreement, services, South Korea, Trade, Trade Deficits, Trump administration, {What's Left of) Our Economy

The U.S. monthly trade deficit rose for the sixth straight month in February, to its highest level ($57.79 billion) since some of the darkest days of the last financial crisis (October, 2008’s $60.19 billion). Combined U.S. goods and services exports set their third monthly record ($204.45 billion) in the last four months, but total imports (at $262.04 billion) hit their fifth straight monthly all-time high. New monthly records were also set for goods imports ($214.49 billion), services exports (for the tenth straight month, with a total of $67.27 billion) and services imports ($47.85 billion).

With U.S.-China trade tensions rising, the huge and chronic American trade shortfall with the PRC sank by 18.61 percent on month in February, but the drop was from an unusually high January figure ,and the new total ranked as the biggest February number ever ($29.26 billion). Similar volatility was on display with the U.S. deficits with other trade partners in the Trump administration’s crosshairs, including South Korea, Canada, and Mexico, as well as in manufacturing and high tech goods.

Here are selected highlights of the latest monthly (February) trade balance figures released Thursday morning by the Census Bureau:

>In the process of revealing several new all-time records and multi-year highs and lows, this morning’s U.S. trade balance report also made clear how volatile the nation’s monthly trade figures can be – including those describing the nation’s commerce with major foreign economies whose trade policies have evoked first criticism and now tariffs and threatened levees from the Trump administration.

>The combined U.S. goods and services trade deficit rose in February sequentially for the sixth straight month. The $57.59 billion total, a 1.63 percent increase from January’s upwardly adjusted $56.67 billion figure, was the biggest monthly trade shortfall since October, 2008’s $60.19 billion – when the Lehman Brothers bankruptcy pushed the global financial crisis into a dangerous new phase and ultimately helped usher in America’s worst downturn since the Great Depression of the 1930s.

> U.S. total exports in February set their third new record in the last four months. At $204.45 billion, they were 1.74 percent greater than January’s upwardly adjusted $200.95 billion and 0.41 percent higher than the previous best of $203.61 billion, set last December.

>But U.S. total imports in February set their fifth straight monthly record. The $262.04 billion total was 1.72 percent higher than the upwardly adjusted January level of $257.61 billion – the previous record.

>The $77.01 billion February U.S. trade deficit in goods was also the biggest such total since the last recession – specifically, the $77.63 billion figure for July, 2008. Sequentially, it grew 0.39 percent from January’s upwardly adjusted $76.71 billion.

>America’s services trade remained healthily in surplus in February. But the $19.42 billion excess of exports over imports was the smallest such total since December, 2012’s $18.63 billion. Month-on-month, the services surplus sank by 3.12 percent in February from January’s upwardly adjusted $20.04 billion – the biggest such drop since last April’s 4.88 percent plunge.

>U.S. goods imports set their third record in the last four months in February. At $214.19 billion, they exceeded the January total (the previous record, which has been upwardly adjusted) of $210.86 billion by 1.58 percent.

>Services exports in February set their tenth straight monthly record, rising sequentially by 0.70 percent from an upwardly adjusted $66.80 billion to $67.27 billion.

>Services imports in February set their fourth straight monthly record, rising sequentially by 2.34 percent from a downwardly adjusted $46.76 billion to $47.85 billion. The monthly increase, moreover, was the biggest since August 2016’s 3.67 percent.

>At the same time, reportedly, the February services imports total was fueled in part by payments made by American broadcasters for the rights to televise the Seoul Winter Olympics.

>With U.S.-China trade tensions escalating, the February figures showed that the massive, chronic goods trade surplus run by China with the United States plunged by 18.61 percent sequentially, from $35.95 billion (the second highest monthly total ever) to $29.26 billion.

>The February figure was the lowest since April, 2017’s $27.63 billion, and the monthly decrease was the biggest since last February’s 26.64 percent. Yet the February figure was an all-time February high.

>U.S. goods exports in February declined by 0.30 percent, from $9.84 billion to $9.81 billion – the lowest such total since last April’s $9.84 billion.

>The much larger amount of U.S. goods imports from China sank sequentially by 14.68 percent in February, from $45.79 billion to $39.07 billion.

>The goods import decline was the biggest since last February’s 20.82 percent, and the monthly total was the lowest since April’s $37.47 billion. Yet as with the goods deficit, the new February goods import total was a new monthly record for February.

>A similar story is told by the new statistics for U.S. merchandise trade with South Korea, whose bilateral trade deal with the United States was recently renegotiated.

>America’s goods trade deficit with South Korea also shrank dramatically on month in February – by 65.28 percent, from $1.97 billion to $0.68 billion.

>The February total was the lowest since the 0.56 billion figure recorded for March, 2012 – as the trade agreement went into effect. The month-on-month plummet, moreover, was the biggest since the 70.50 percent drop in February, 2012.

>Yet the January U.S.-South Korea merchandise trade deficit was the biggest since October’s $2.51 billion.

>Still, the composition of the monthly U.S.-South Korea goods trade deficit change differed dramatically from that of the U.S.-China deficit.

>Not only did U.S. merchandise imports from South Korea fall sequentially by 12.05 percent – to $4.97 billion, the lowest such total since last February’s $4.87 billion, and the greatest monthly percentage drop since that month. U.S. merchandise exports to South Korea also jumped on month by 16.36 percent, to $4.92 billion.

>That increase was the biggest percentage-wise since last March’s 22.04 percent.

>The U.S.’ merchandise shortfall with Canada nosedived in February, too – by 89.59 percent on month, from January’s $3.70 billion to $0.38 billion.

>The total was the lowest since last September’s $0.25 billion, and the sequential drop was the steepest since May, 2016’s 95.84 percent.

>But the January deficit was the biggest since December, 2014’s $4.07 billion.

>Most of the U.S.-Canada merchandise deficit’s February monthly decrease came on the American imports side, as these purchases declined by 8.95 percent to $23.92 billion – the largest such decrease since last July’s 11.49 percent, and the lowest such total since that month’s $22.89 billion.

>But U.S. goods exports to Canada also rose on month in February – by 4.28 percent, to $23.53 billion.

>A different kind of volatility was exhibited by U.S. merchandise trade with its other North American Free Trade Agreement (NAFTA) partner, Mexico.

>The American goods trade shortfall with Mexico soared by 46.62 percent sequentially in February, to $6.06 billion. That’s the biggest such increase since the 81.73 percent of March, 2001 – nearly 17 years ago.

>Yet the $4.14 billion January U.S. merchandise deficit with Mexico was the smallest since last January’s $3.95 billion.

>U.S. goods exports to Mexico sank by 7.24 percent on month in February, to a five-month low of $20.22 billion, while goods imports from Mexico climbed by 1.35 percent, to $26.29 billion.

>Volatility in these bilateral deficits was mirrored in February by volatility in the manufacturing trade deficit. This chronic and enormous shortfall plunged sequentially by 15.48 percent, to $73.21 billion. But the January total of $86.62 billion was the second highest of all time.

>Manufacturing exports improved by 2.89 percent sequentially in February, to $88.86 billion, while imports skidded by 6.31 percent, to $162.07 billion.

>High tech goods trade displayed major ups and downs, too. In February, the shortfall cratered 30.96 percent, to $7.93 billion. That was the smallest total since last April’s $6.04 billion.

>But the $11.49 billion January gap was 14.25 percent bigger than the December figure.

(What’s Left of) Our Economy: On Eve of Trump Tariffs, a Big Increase for the (January) U.S. Trade Deficit

Tags

Canada, China, European Union, exports, high tech goods trade, imports, manufacturing, merchandise trade, Mexico, NAFTA, North American Free Trade Agreement, oil, South Korea, tariffs, Trade, Trade Deficits, Trump, {What's Left of) Our Economy

The U.S. monthly trade deficit surged in January to its highest level ($56.6o billion) since October, 2008 ($60.19 billion) – when the Lehman Brothers bankruptcy sparked a worldwide financial and economic panic.

New all-time records were set by monthly services exports ($66.66 billion) and imports ($46.78 billion), and December results for both were revised significantly upward (0.77 percent for the former, and 2.07 percent for the latter). The trade deficit in petroleum products jumped by 116.64 percent on month in January – the biggest sequential percentage increase ever – to $7.08 billion. That total was a post-March ($8.28 billion) high.

America’s January merchandise trade deficit in goods ($76.49 billion) was a post-July, 2008 ($77.63 billion) high, while the trade gaps in manufacturing and in goods with China bounced back on month to their second highest all-time totals ($35.95 billion and $86.62 billion, respectively). Moreover, U.S. merchandise exports to China sank by their greatest percentage on month (28.05 percent) since January, 1999 (43.37 percent). Total exports fell on month (by 1.30 percent) for the first time since October, and combined goods and services imports dipped fractionally (to $257.51 billion) from the upwardly revised record set in December.

Here are selected highlights of the latest monthly (January) trade balance figures released this morning by the Census Bureau:

>The combined U.S. goods and services trade deficit rose on month in January to its biggest total ($53.91 billion) since October, 2008 ($60.19 billion) – when the world economy teetered on the brink of meltdown due to the Lehman Brothers bankruptcy.

>The figure represented a 4.99 percent increase from a December figure of $53.91 billion that was revised up by an unusually large 1.49 percent.

>January saw all-time records for monthly services exports and imports. The former improved sequentially from by 0.41 percent, from $66.39 billion to $66.66 billion, while the latter grew by 0.38 percent, from $46.60 billion to $46.78 billion.

>At the same time, both services trade figures also saw major revisions in the December – both upward. The exports number was raised by 0.77 percent, and imports upgraded by an enormous 2.07 percent.

>January’s trade deficit increase was led in relative terms by the nation’s oil trade deficit – which more than doubled sequentially, from $3.27 billion to $7.08 billion. That was the highest such total since last March’s $8.28 billion.

>Partly as a result, the U.S. merchandise trade deficit widened sequentially in January by 3.79 percent, to $76.49 billion – its highest such level since July, 2008’s $77.63 billion.

>But manufacturing contributed significantly to the rise in the overall trade deficit and the merchandise shortfall as well. Its chronic trade shortfall ballooned by 14.54 percent on month to hit $86.62 billion – just shy of October’s record of $88.98 billion.

>Manufacturing exports slid by 8.99 percent sequentially in January, from $94.89 billion to $86.36 billion, while imports were off by only 0.08 percent, from $173.13 billion to $172.99 billion.

>In turn, helping to fuel this deterioration in the manufacturing trade balance was the 16.70 percent worsening of the U.S. merchandise deficit with China. The January figure of $35.93 billion was the second highest of all time, too – trailing only September, 2015’s $36.29 billion. The increase, moreover, was the biggest since May, 2016’s 19.43 percent. 

>Mainly responsible for the China trade deficit’s increase was a 28.05 percent nosedive in U.S. goods exports to the strongly growing People’s Republic. Although the decrease followed a record December export total of $13.67 billion, it was still the biggest such percentage drop since January, 1999 (43.37 percent). 

>The $9.84 billion in U.S. goods sales to China in January, moreover, was the lowest such figure since June’s $9.71 billion. 

>U.S. merchandise imports from China rose – by 2.95 percent, to $45.79 billion.

>Total goods exports were down in January by 1.30 percent (to $200.91 billion) from December’s upwardly revised $203.61 billion. The drop was the first since October.

>Total imports in January dipped only fractionally – to $257.510 billion – from December’s upwardly revised record of $257.514 billion.

>The high tech goods trade deficit rose by 14.25 percent on month in January, from $10.06 billion to $11.49 billion.

>High tech exports plunged on month by 18.11 percent to $27.46 billion – a post February, 2017 ($25.39 billion) low, and the biggest falloff since January, 2017’s 19.01 percent.

>High tech goods imports sank, too – by 10.64 percent, to $38.95 billion. That was the biggest drop since last February’s 13.31 percent.

>As the Trump administration’s efforts to renegotiate the North American Free Trade Agreement (NAFTA) face an uncertain future, America’s merchandise trade deficit with Canada shot up by 65.04 percent on month in January, to $3.64 billion. That’s its highest level since December, 2014 ($4.07 billion).

>Yet the U.S. goods trade shortfall with Mexico decreased by 23.03 percent – to $4.14 billion. That’s the lowest such total since last January ($3.95 billion).

>Trade tensions with the European Union (EU) seem to growing as well, due mainly to the Trump administration’s announcement of steel and aluminum tariffs. In January, however, the merchandise trade gap with the EU fell by 13.88 percent, to $13.62 billion.

>President Trump is also hoping to revamp the bilateral U.S.-South Korea trade agreement (KORUS). In January, America’s goods trade deficit with South Korea hit $1.97 billion – a 57.57 percent monthly rise. At the same time, December’s $1.25 billion goods trade gap was the smallest since December, 2016’s $1.17 billion.

(What’s Left of) Our Economy: U.S. Trade Success Increasingly Depends on Raw Materials

Tags

commodities, comparative advantage, exports, manufacturing, net exports, raw materials, Trade, trade surpluses, {What's Left of) Our Economy

History teaches pretty clearly that relying heavily on exports of raw materials isn’t a great formula for long-term national economic success. That’s one big reason that the release last week of the full-year 2017 U.S. trade statistics tells such a depressing story. Because that’s exactly what the United States has been increasingly engaged in.

The best measure of such trade performance is net exports, or trade surpluses. These data show which goods and services a country sells overseas most proficiently – and therefore which goods and services they’re likely to produce most successfully. Were this not the case, trade could not possibly – as the prevailing comparative advantage theory holds – foster the most efficient possible global division of labor.

And according to the new annual trade statistics, America’s greatest comparative advantage is in commodities. Here’s a list of the top ten trade surpluses run in goods by the United States in 2017, and their magnitude. (For the wonky, these are categories from the six-digit level of the North American Industry Classification Series (NAICS) – the main system now used by the U.S. government for slicing and dicing the national economy. The six-digit level is the one that does the best job of distinguishing between final products and their parts and components – which is critical given how much American and global trade now takes place in the latter, due to the development of global supply chains.)

1. Petroleum refinery products: $34.39 billion

2. Special classification provisions: $23.50 billion

3. Soybeans: $21.25 billion

4. Plastics materials and resins: $15.31 billion

5. Liquid natural gas: $14.60 billion

6. Waste and scrap: $12.19 billion

7. Non-anthracite coal & petroleum gases: $9.22 billion

8. Motor vehicle bodies: $9.18 billion

9. Corn: $8.99 billion

10: Non-poultry meat: $7.38 billion

Six of these ten are commodities, and “special classification provisions” – which are mainly “exports of articles imported for repairs etc.; imports of articles exported and returned, unadvanced; imports of animals exported and returned” – might as well be.

To be sure, aerospace products, especially commercial aircraft, should be at or near the top of this list. But because Boeing doesn’t want final products and parts and components broken out in trade data, it’s no longer possible to find apples-to-apples figures for these products. And even their inclusion would produce a raw materials-heavy list.

Here’s the list of the top ten trade surplus items ten years ago, in 2007 (when these disaggregated aerospace numbers were still reported publicly):

1. Aircraft: $39.54 billion

2. Semiconductors & related devices: $22.71 billion

3. Waste and scrap: $17.69 billion

4. Plastics materials and resins: $15.32 billion

5. Aircraft parts and auxiliary equipment: $13.46 billion

6. Soybeans: $9.92 billion

7. Special classification provisions: $9.84 billion

8. Corn: $9.84 billion

9. Miscellaneous basic organic chemicals: $9.70 billion

10. Oil and gas field machinery & equipment: $8.54 billion

Only three of the sectors on this list are commodity sectors, and adding the special classifications trade surplus makes four of ten low value sectors.   

Here’s another way to look at this comparison. In 2007, the U.S. manufacturing trade deficit (the flip side of course of the above surpluses) accounted for 76.99 percent of the overall merchandise deficit on a Census basis. The 2017 figure? 116.50 percent.

There’s a first time for everything, and maybe the United States will prove the exception to this rule about the value of manufactures versus commodities trade. Maybe what’s decisively important that two of the new commodities items on the 2017 list were energy items (liquid natural gas and non-anthracite coal and petroleum gases). But with energy-heavy countries like Saudi Arabia frantically trying to diversify their economies, that seems doubtful. As to the question of a comparative advantage in commodities providing a durable foundation for American prosperity – the burden of proof surely remains with the optimists.

(What’s Left of) Our Economy: What Trump TPP Disaster?

Tags

exports, free trade agreements, merchandise exports, TPP, Trade, Trade Deficits, Trans-Pacific Partnership, Trump, {What's Left of) Our Economy

The foreign policy and economic policy establishment verdict is in: President Trump’s decision at the start of his administration to abandon the Trans-Pacific Partnership (TPP) trade agreement has been a “disaster.” Economically speaking, in particular, they insist, the deal would have significantly boosted U.S. exports, and therefore the nation’s growth and worker incomes. No less than Barack Obama said so when he was President. And the recent decision of the other eleven TPP countries to conclude the agreement on their own will only increase the costs to Americans.

No one has a perfect crystal ball on these matters, so these gloomy predictions could well be right. (At the same time, none of these forecasters seems to admit that, as I’ve pointed out, the United States would have represented nearly two-thirds of the total TPP economies, and that most of the major members depended heavily on net exports, especially to the United States, for their growth.) But it’s now been more than a year since Mr. Trump announced the pull-out, and raise your hand if you can see a trade or economic disaster.

Let’s start with one of the establishment’s main measures of U.S. trade policy success – boosting American gross exports – and let’s keep in mind that Mr. Obama signed the TPP in early 2016. The year before, U.S. goods exports to these eleven other countries combined fell by 6.51 percent. So that looked like one pretty strong argument for improving the situation with some effective trade diplomacy. For comparison’s sake, U.S. goods exports to the entire world that year decreased by somewhat more – 7.32 percent.

This export-focused pro-TPP argument seemed pretty convincing the following year, too, after the former President signed the deal and when he spent considerable time trying to secure Congressional ratification. That year, U.S. merchandise exports to the other signatories combined fell slightly faster (by 3.62 percent) than they did to the rest of the world (3.47 percent).

And what about the first year of TPP killer (at least for the United States) Donald Trump’s presidency? American goods sales to the “TPP Eleven” are back up by 5.98 percent. That’s somewhat weaker growth than global goods exports, (6.60 percent), but this particular section of the sky doesn’t seem to be falling.

It’s hard to find a disaster in the trade balance figures, either – my favorite method of evaluating American trade policy. Between 2014 and 2015, the year before the Obama signing, the United States’ merchandise trade deficit with the TPP countries grew by two percent, and with the world as a whole by 1.44 percent. So American trade with these prospective treaty partners was faring relatively well – though not very well.

The year after, mainly following the signing, came a major change. The goods trade shortfall with the TPP Eleven rose by 6.38 percent even as it was falling by 1.12 percent with the world overall. And in Trump Year One? Both such U.S. deficits rose – by 10.18 percent year-on-year for the TPP countries, and by 8.06 percent for the world as a whole.

In absolute terms, this means that the TPP gap lately is up faster than the global gap. So score one for the TPP fans? But the numbers also show that the deficit worsened much more dramatically with the rest of the world when compared with the previous year. So score one for the opponents.

As I see it, the opponents deserve far more credibility, since the next euphoric trade deal prediction by supporters will be their first. But given that the Trump TPP decision is only a year old, and the new agreement hasn’t even been signed yet, I’m willing to let a decent interval pass before rendering a firm conclusion. If the trade cheerleaders have any grip left on reality, they’ll do the same.