(What’s Left of) Our Economy: April’s U.S. Trade Figures Sure Weren’t Winners

Tags

China, economic growth, exports, GDP, Germany, gross domestic product, high tech goods, imports, Made in Washington trade deficit, manufacturing, non-oil goods trade deficit, Trade, trade deficit, {What's Left of) Our Economy

Since last Friday was one of those days when both the U.S. jobs figures and trade figures were released the same morning, and since I was traveling that day, I didn’t get a chance to report on the latter as promptly as usual. But that doesn’t mean the trade figures should be overlooked! Here’s a quick rundown of the high- (or low-) lights, which cover the month of April:

>The combined goods and services U.S. trade deficit rose by 5.15 percent on month, from $45.28 billion to $47.62 billion. But for a change, the big news in this total trade shortfall category was in the revision for the March gap – it was upgraded from an initially reported $43.71 billion. That’s a ginormous 3.61 percent.

>Total exports fell sequentially in April by 0.25 percent, from $191.46 billion to $190.98 billion, and total imports increased from $236.74 billion to $238.59 billion, or 0.78 percent.

>And quite naturally, the March revisions were substantial, too. That month’s combined export total was upgraded by 0.25 percent, and the much larger combined import total revised up by 0.87 percent.

>Also disturbing about the new trade figures: They show that for the first four months of this year, the total trade deficit is up by 13.43 percent on a year-to-date basis. That’s more than four times as fast as the total economy grew between the first quarter of last year and the first quarter of this year (4.08 percent – both these figures are in pre-inflation dollars).

>With Germany’s trade policies in the Trump administration’s cross-hairs and therefore in the news, it’s noteworthy that the U.S. merchandise shortfall with Germany grew sequentially by 5.43 percent, to $5.48 billion in April. That’s the highest monthly total since last August’s $6.05 billion.

>U.S. goods imports from Germany fell by 4.11 percent sequentially, but America’s goods exports sank on month by 15.34 percent.

> At the same time, the Germany goods deficit is down by 5.24 percent year-to-date.

>Of America’s other major trade partners, only the merchandise deficit with China increased significantly on month – from $24.58 billion to $27.63 billion, or 12.42 percent.

>U.S. goods exports to China advanced by 2.22 percent, but imports rose by 9.55 percent.

>The U.S. merchandise trade deficit with China is 4.21 percent larger in the first four months of this year than it was the first four months of last year.

>The April manufacturing trade deficit of $70.31 billion was just 0.79 percent higher than March’s $69.76 billion. Manufactures exports were off by 7.91 percent sequentially, while the much greater amount of imports fell by just 4.27 percent.

>Year to date, the manufacturing trade deficit looks set to establish yet another annual record. At $276.12 billion, it’s already running 6.20 percent ahead of last year’s pace.

>For the first four months of this year, manufacturing exports are up by 3.44 percent, but imports are 4.64 percent higher.

>The story is even worse in high tech goods. The trade shortfall actual dipped by 0.49 percent on month in April – from $6.07 to $6.04 billion. Exports were 8.28 percent lower than in March, and imports were off by 7.01 percent.

>Year-to-date, however, the high tech trade gap is up by 36.69 percent – from $18.37 billion to $25.11 billion. Exports have inched up by 0.25 percent, but imports are 5.42 percent higher.

>The U.S. trade deficit in oil fell by a sharp 35.56 percent sequentially in April, from $8.43 billion to $5.43 billion – the lowest monthly total since last September ($5.13 billion).

>But the April non-oil goods deficit of $61.71 billion was 9.22 percent higher than March’s $56.50 billion. It was also the highest monthly total for this shortfall – which is heavily influenced by U.S. trade agreements and other trade policy decisions – since March, 2015’s $61.74 billion (the highest monthly figure in a data series that goes back to 1992).

>Moreover, in real terms, the April non-oil goods deficit climbed 7.62 percent on month, to $62.04 billion. That’s also the highest total since March, 2015’s $62.80 billion (which was another all-time high).

>Since the headline U.S. government data on changes in the gross domestic product (GDP) are adjusted for inflation, this lofty figure for the real non-oil goods deficit indicates that this Made in Washington shortfall’s growth will drag on economic growth in the second quarter of this year.

Making News: A New USAToday Op-Ed – & More!

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automation, climate change, Germany, Jobs, Lifezette.com, Making News, manufacturing, Paris climate accord, Trade, Trump, USAToday

I’m pleased to announce the publication of my latest op-ed article – a piece that appears in USAToday this morning on President Trump’s criticisms of Germany’s trade policies. Here’s the link.

Incidentally, the article ran as a rejoinder to an unsigned USAToday editorial on the subject that also was published today.  The paper’s editors have been using this “pro-con” format for many years, and I think they deserve great credit for seeking out viewspoints with which they disagree.

In addition, a June 1 post on Lifezette.com included my (skeptical) opinions about claims that Mr. Trump’s withdrawal from the Paris climate change accord will cede global leadership on the issue to China.

Moreover, a May 25 Lifezette article quoted me on a new study finding that trade and offshoring have been responsible for much more manufacturing job loss lately than automation.

And keep checking in with RealityChek for news of upcoming and recent media appearances and other developments.

 

 

(What’s Left of) Our Economy: Where Trump Deserves High, Low, and “Incomplete” Marks on Germany Trade

Tags

advanced manufacturing, automotive, commodities, comparative advantage, Financial Crisis, Germany, Global Imbalances, Great Recession, innovation, manufacturing, productivity, Trade, Trade Deficits, trade surpluses, Trump, {What's Left of) Our Economy

As I’ve suggested, President Trump has big, valid points to make about Germany’s auto trade with the United States. Not only does America run an enormous deficit with Germany in vehicles and parts, but claims that Germany deserves great praise from Washington because it makes so many vehicles in the United States are completely unjustified. For they overlook its companies’ very low levels of U.S. content and only very modest improvement on this score. That is, German vehicles are overwhelmingly screwed together in the United States, and therefore add much much less value to the American economy than autos made with domestic parts.

The trouble is that America’s troubles with German trade policies greatly transcend the automotive industry and, to a great extent, Germany. I’ve previously written that there’s a fundamental problem that both the administration and it’s critics are missing:  Germany’s economy, like China’s and many others around the world, is simply not structured in such a way as to make mutually beneficial trade with the United States possible.

But there’s another big U.S.-Germany trade issue that needs highlighting, along with a major danger that Bonn’s approach to trade is creating for the entire world – at least in the medium or long-term.

That other U.S. Germany trade problem has to do with the makeup of bilateral commerce. If you look at the nature of what the United States trades most successfully with Germany and vice versa, you find that the former category contains a mix of high value manufactures and commodities, while the latter is dominated by advanced industrial goods. Here are lists of the sectors in which America last year ran its biggest trade surpluses and deficits with Germany. (To the surplus list should be added – prominently – aircraft, which are not counted accurately in the U.S. International Trade Commission database I’m relying on.)

Top ten U.S. trade surpluses with Germany: 

glass products 

tree nuts 

soybeans 

computers 

non-costume jewelry 

non-anthracite coal & petroleum gases 

fin-fish products

computer parts 

surgical appliances and supplies 

pulp mill products 

 

Top ten US deficits with Germany

autos and light trucks 

pharmaceuticals

goods returned from Canada 

motor vehicle transmissions and transmission parts

aircraft engines and engine parts

construction machinery

miscellaneous general purpose machinery 

miscellaneous basic org chemicals 

miscellaneous engine equipment 

motor vehicle parts

These results are disturbing because, contrary to the superficial conventional wisdom, if you take seriously standard trade theory and its core concept of comparative advantage, sectoral trade balances matter tremendously. For the main idea behind the freest possible international trade is structuring the world economy so as to enable those countries most proficient at producing various goods and services to dominate their output. So surpluses and deficits in different industries show which countries are passing and failing this test – and thus which countries look likely eventually to control worldwide supplies of the sophisticated goods that create so many high wage jobs and foster so much innovation and productivity growth.

Since the U.S.-Germany data aren’t U.S.-global data, in theory they could be anomalies. In other words, Americans could be doing better with the world as a whole, and therefore, the nation’s prospects in high value industries could be a lot brighter. Unfortunately, that’s not the case at all. The makeup of U.S.-Germany trade isn’t terribly different from the makeup of U.S. global trade, in that America’s trade winners are, again, a mix of commodities and high value goods (again, including aircraft), and its losers are nearly all advanced sectors.

Top ten US surpluses globally

petroleum refinery prods

soybeans

special classification goods

plastics materials andcresins

waste and scrap

corn

liquid natural gas

semicaonductor manufacturing equipment

non-poultry meat products

turbines and turbine generator sets

 

Top ten US deficits globally

autos and light trucks

crude oil and natural gas

goods returned from Canada

broadcast and wireless communications equipment

computers

pharmaceutical products

telecommunications equipment

audio and video equipment

aircraft engines and engine parts

games, toys, and children’s vehicles

Yet Germany also is contributing significantly to a major trade-related threat that threatens the entire world, not just the United States. I’ve repeatedly spotlighted blue chip academic research concluding that unprecedented global imbalances centered on American trade shortfalls were instrumental in setting the stage for the last global financial crisis and the painful recession that followed. Worse, evidence keeps accumulating that international commerce is becoming worrisomely lopsided again, and that Germany’s overall international surpluses – currently the world’s largest – have generated much of the problem.

Indeed, a valuable reminder came in this morning’s Washington Post:

“[G]ermany is one of a number of countries, including China, Japan, and South Korea that are now saving far more than they are either consuming or investing….At some point, the world will be unable to absorb the capital surpluses of Germany, China and others, leading to another painful correction that might undermine the liberal order.”

Interestingly, Germany itself has indirectly acknowledged these risks, and hinted that it recognizes some responsibility to get the surpluses down. Unfortunately, Berlin has demonstrated few signs of following through. So although some of President Trump’s focus on the German trade issue seems off target, it’s also clear that the sense of urgency he’s brought to the issue, from both an American and global standpoint, is not only appropriate, but necessary.

Following Up: Germany’s Merkel on NATO and Defense May be Leading, but Could Lack Followers

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allies, Angela Merkel, Europe, Following Up, Germany, NATO, North Atlantic treaty Organization, Pew Research Center, polls, Russia, Trump

German Chancellor Angela Merkel, who’s not known as a bomb-thrower, at least chucked a pretty good sized grenade into newly volatile relations between the United States and the European members of the North Atlantic Treaty Organization (NATO).

Merkel told a crowd at a political rally today that “The times when we could fully rely on others have passed us by a little bit, that’s what I’ve experienced in recent days.” She clearly was referring to her experience with President Trump, a longtime skeptic of the Atlantic alliance, at NATO’s summit last week. And Merkel continued, “For that reason,” Merkel continued, “I can only say: We Europeans really have to take our fates in our own hands.”

These remarks don’t count as full-fledged bombs for several big reasons. First, as I noted in a recent post, the Trump refusal to endorse explicitly NATO’s Article Five pledge to aid militarily any member under armed attack might have the transatlantic foreign policy crowd in a state of hysteria, but the clause is ambiguous and German and other European leaders have always known – and fretted – about this.

Moreover, U.S. allies repeatedly have discussed creating a meaningful defense capacity of their own with varying degrees of independence from the United States. So far, they’ve never followed through – mainly because American leaders typically responded with renewed pledges of undying loyalty. So the allies understandably felt perfectly free to continue free-riding.

But let’s say that This Time It’s Different (and sometimes it is, otherwise, we’d have no history). What’s interesting to say the least is that Merkel is going to face some major obstacles with her own people and many others in Europe. How do we know this? Let’s simply look at that Pew Research Center NATO poll I posted on yesterday.

Now some sharp RealityChek readers may be wondering why I’m using this Pew data, since yesterday’s post demonstrated many fatal flaws. Here’s the answer: My criticism of Pew focused on its failure to inform American respondents that the nation’s NATO commitments created any risks. That’s important given how ignorant so many Americans remain about even major foreign policy realities, because they’re so physically isolated and insulated from the rest of he world.

But European publics – which were also surveyed by Pew, and whose views I’ll discuss below, are substantially different. After all, they live much closer to Russia, NATO’s main concern. So even if they’re by no means foreign policy experts, the continent’s war-torn past is something much more apparent to them, and especially to their parents and grandparents. Just as important, they’re the ones who will have to live with the worst consequences of poor governmental national security decisions. And if the views they expressed to the Pew researchers are representative, Merkel could well find it almost impossible to help create an independent European defense effort worthy of the name.

Interestingly, Merkel herself implicitly acknowledged that not all the forces jeopardizing European unity are coming from Washington. As she observed, the United Kingdom just voted to withdraw from the European Union last year. And of course she knows how strong anti-EU sentiments remain throughout Europe, and how many stem from resentments over the outsized role Germany has played in dealing with (and allegedly contributing to) recent economic crises like the one that’s engulfed Greece.

Yet what Merkel may not yet know about her compatriots and other Europeans should trouble her even more. For example, according to Pew, German support for NATO is strong (67 percent view the alliance favorably). But only 40 percent of Germans agree that their country should use military force to defend a fellow NATO ally under attack. Fully 53 percent would want Germany to sit out the conflict.

Merkel might draw some comfort from seeing that Germany’s commitment to NATO’s core mission is the weakest among the countries surveyed. But it’s not whoppingly lower than the support for going to war registered in the two other major European military powers, the United Kingdom (45 percent) and France (53 percent). Further, the Pew results show that a distinct minority of those surveyed in NATO’s European members view Russia as a “major threat to their nation.”

Merkel, however, isn’t the only national leader who should be paying close attention to these Pew findings. If they’re accurate, President Trump and the rest of Washington need to ask themselves whether America can count on any prompt, significant assistance from NATO Europe if push comes to shove.

Our So-Called Foreign Policy: Trump’s Real NATO Mistake

Tags

allies, Article Five, Baltics, Barack Obama, Charles de Gaulle, Cold War, Europe, France, Germany, NATO, NATO expansion, North Atlantic treaty Organization, nuclear deterrence, nuclear weapons, Our So-Called Foreign Policy, Poland, Russia, Soviet Union, tripwire, Trump, United Kingdom

President Trump’s tireless critics are at it again, accusing him of calling into question America’s “sacred” and allegedly legally binding obligation to come to the military defense of any of its European allies in the North Atlantic Treaty Organization (NATO) if they come under armed attack.

As charged by the author linked above (from the reflexively establishmentarian Brookings Institution), the president’s refusal to endorse this obligation explicitly in his speech today at alliance headquarters in Brussels, Belgium, will “raise grave doubts about the credibility of the American security guarantee and provide Russia with an incentive to probe vulnerable Baltic states.” Sounds awful – and unprecedented – right? Actually, not even close.  But as you’ll see, Mr. Trump could be on his way to creating another big – and completely unnecessary – problem.

In the first place, in concrete terms, Article Five legally obligates the United States to do absolutely nothing specifically if one of its NATO allies comes under assault. The clause simply requires treaty signatories to “assist the Party or Parties so attacked by taking forthwith, individually and in concert with the other Parties, such action as it deems necessary, including the use of armed force, to restore and maintain the security of the North Atlantic area.”

And this flexibility-preserving wording is no accident, or product of jargon-addicted diplomats or international lawyers. It resulted from the U.S. Congress’ insistence that the American government and the people to which it owes its first loyalties to retain the legally recognized right to decide when to go to war. And keep in mind: Congress was determined to reserve the right to stay out of a conflict in Europe as the Cold War was reaching its height.

Just as important: The European allies recognized this right – and its implications – as well, especially after the Soviet Union’s development of major nuclear forces greatly increased the risk to the American homeland of nuclear attack if it plunged into war on the allies’ behalf. We know this for sure because the continuing ambiguity ultimately persuaded both the British and French to create their own nuclear forces. As former French President Charles de Gaulle warned, the United States could not reasonably be expected to endanger the existence of New York or Detroit to save Hamburg or Lyons.

Tragically, American leaders were so strongly opposed to its allies taking back control over their own fates that they strove almost fanatically to convince the Europeans that the United States could indeed be trusted. And Washington put its money where its mouth was, stationing hundreds of thousands of American soldiers, sailors, and air force personnel and their families on or around the European continent. The idea was to create a “trip wire” aimed at denying any U.S. President a real choice of rushing to Europe’s defense with whatever threats or means were necessary. For standing by in the face of aggression would mean a slaughter or American troops and possibly innocents by vastly superior Soviet military forces.

Even during this era of high East-West tensions, however, American leaders never completely lost sight of the desirability of shifting as much of the burden of nuclear risk as possible onto the Europeans – while maintaining as much control as possible over nuclear weapons use. The transatlantic feud over intermediate-range nuclear forces – which threatened to confine the nuclear damage of any East-West war to Europe, leaving the American and Soviet homelands unscathed – was only one prominent example. And even this U.S. aim was fatally muddied, or at best thoroughly confused, by the continuing enormous military presence in Germany, directly in the likeliest path of the Soviet conventional juggernaut.

After the Cold War ended, the tripwire was steadily dismantled, but American presidents continued to treat Article Five as an ironclad promise to defend NATO members militarily – as demonstrated by the 2013 Obama statement in the Atlantic article linked above. Moreover, once Russian military and paramilitary activity began to increase in Moscow’s “near abroad,” Washington began, hesitatingly, to be sure, to respond to the demands of the newest NATO members in Russia’s sights for U.S. tripwire forces of their own.

Hence the charges that President Trump’s latest statement could dangerously destabilize NATO’s eastern flank. But there’s far more to the situation. In the first place, there’s much evidence linking Russia’s new revanchism to NATO’s expansion eastward right up to Russia’s borders. Second, if Article Five were rigidly applied to new NATO members such as the Baltic states or former Soviet bloc countries like Poland, the United States would be running the risk of nuclear attack on behalf of countries that (a) are completely un-defendable with conventional military forces alone, because they’re right next door to Russia; and (b) consequently, have never been considered vital or even significant interests of the United States.

Troublingly, however, despite the latest Trump statement (or lack thereof), which arguably could inject the Eastern European countries with a needed dose of realism concerning their real options in dealing with Moscow, the president has so far continued the policy of incrementally responding to these countries’ requests for tripwires.

In other words, his big mistake isn’t casting doubt on America’s commitment to these and other European countries. For if the United States might have balked risking New York or Detroit for Hamburg or Lyons, it’s certainly not going to jeopardize an American city or two to save Warsaw or Vilnius. Instead, Mr. Trump apparently is trying to fence-straddle here, which could well create the worst of both worlds on both sides of the Atlantic.

(What’s Left of) Our Economy: U.S. Trade Deficit Took a (Largely Asian) Holiday in February

Tags

Asia, Census Bureau, China, exports, Germany, high tech goods, imports, Japan, Made in Washington trade deficit, manufacturing, New Year, non-oil goods trade deficit, recovery, South Korea, Trade, trade deficit, Trump, {What's Left of) Our Economy

America’s goods and services trade deficit dropped by a marked 9.58 percent on-month in February from the near-five-year high it reached in January. Largely responsible were narrower trade gaps with China (down 26.64 percent) and other Asian countries celebrating their new year. In turn, these results contributed to smaller shortfalls in the manufacturing (down 19.88 percent) and high tech goods (down 46.39 percent) so prominent in their commerce with the United States. Combined goods and services exports in February inched up sequentially to reach their highest level ($192.87 billion) since December, 2014 ($197.46 billion).

Goods exports rose slightly (to $128.46 billion) – their best total since April, 2015 ($128.97 billion). High tech goods imports, meanwhile dropped to their lowest level ($25.39 billion) since February, 2015 ($28.80 billion). In addition, the total trade deficit, the goods deficit, total imports, and goods imports declined by their biggest sequential amounts since last March. Although Germany’s trade and currency practices have been targeted by the Trump administration, February’s goods trade shortfall with Germany ($4.44 billion) was the smallest since January, 2013 ($3.93 billion).

The real non-oil goods deficit – which is heavily influenced by policy and thus should be considered Made in Washington – decreased by 7.30 percent, which suggests that trade’s recovery era drag on U.S. growth will diminish.

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

>The February U.S. trade deficit seemed to take (an Asian) holiday. Its 9.58 percent drop from January’s (downwardly adjusted) near-five-year high of $48.17 billion to $43.56 billion largely reflected subdued business in Asian export-heavy economies that celebrated their new year.

>The longstanding and enormous U.S. merchandise trade deficit with China, for example, plunged by 26.64 percent sequentially in February – from $31.30 billion to $22.97 billion. U.S. goods exports to the still strongly growing Chinese economy decreased by 2.72 percent, but American goods imports were down by 20.82 percent.

>Similarly, the merchandise shortfall with Japan fell by 14.64 percent on month in February, from $5.47 billion to $4.67 billion. U.S. goods exports actually grew (by 3.38 percent) but merchandise imports shrank by a great 6.02 percent.

>In addition, in February the goods trade gap with free trade agreement partner Korea nosedived by almost half – from $2.59 billion to $1.30 billion. U.S. merchandise exports to Korea climbed by 6.06 percent, but the much greater amount of imports was off by 18.21 percent.

>The smaller Asia deficits also showed up in February’s manufacturing and high tech goods trade flows.

>America’s chronic and huge manufacturing trade deficit slid by 19.88 percent, from $75.54 billion to $60.52 billion. Manufactures exports inched up by 0.87 percent, but imports were down 9.07 percent.

>In high tech goods, the U.S. shortfall cratered by 46.39 percent, from $8.46 billion to $4.54 billion. Exports of these products decreased by 2.57 percent, to reach their lowest level since last February ($25.57 billion), but imports dropped by 13.31 percent, to $29.93 billion – their lowest level since February, 2015 ($28.80 billion).

>February saw America’s total exports grow by only 0.19 percent, but that was enough to achieve their highest total ($192.87 billion) since February, 2014 ($197.46 billion).

>Goods exports in February advanced modestly, too (by 0.27 percent on month), but that gain resulted in their best monthly performance since April, 2015 ($128.97 billion).

>Meanwhile, in February the total trade deficit, the goods deficit, total imports, and goods imports fell by their biggest monthly drops since last March – though the latest declines themselves were considerably smaller.

>The 9.58 percent February decrease in the combined goods and services shortfall compares with last March’s 18.27 percent.

>The 6.56 percent February shrinkage of the goods deficit compares with last March’s 12.14 percent decline.

>The 1.77 percent February decline in total imports compares with last March’s 4.65 percent.

>And the 2.13 February percent fall-off in goods imports compares with last March’s 5.59 percent.

>President Trump’s administration has charged Germany with racking up excessive trade surpluses due to currency manipulation and other protectionist practices, but in February, Germany’s merchandise trade surplus with the United States dropped for the fourth straight month. In fact, the $4.44 billion total was the lowest since January, 2013’s $3.93 billion.

>Also down in February was the inflation-adjusted U.S. non-oil goods deficit. These trade flows – which are heavily influenced by American trade agreements and similar policies – are decidedly Made in Washington, and throughout the current economic recovery, they have dragged on feeble U.S. growth. As of year-end, 2016, their increase had slowed cumulative recovery growth by 17.64 percent, or $433.43 billion.

>Calculating the growth drag for the first quarter of 2017 will require a release of first quarter GDP figures – which are scheduled for later this month. But if the Made in Washington deficit continues to shrink, trade could well wind up making a rare net contribution to the expansion.

(What’s Left of) Our Economy: Latest Trade Deficit Scuffles Still Missing Lessons of 2008

Tags

bubbles, finance, Financial Crisis, free trade agreements, G20, Germany, Global Imbalances, investment, Japan, manufacturing, offshoring, tax reform, Trade, Trade Deficits, trade policy, trade surpluses, Trump, Wall Street, {What's Left of) Our Economy

Roughly ten years after it broke out, it’s still incredibly rare to see economists or pundits link U.S. and resulting global trade imbalances with the financial crisis. So I’m always thrilled – as I tweeted this past week – to see it ever happen. All the same, even this insightful column by Reuters’ Edward Hadas simply dances around the crucial link between these imbalances and American trade policies, and in particular, their offshoring-friendly nature.

In a March 15 essay, Hadas commented on the German (and other countries’) trade surpluses that have attracted such attention this past week for two main reasons: German Chancellor Angela Merkel’s first-ever meeting with President Trump, and a conclave taking place at the same time of the finance chiefs of the world’s 20 leading economies (the so-called G20). The author’s main contention is indisputable as far as it goes. According to Hadas, the real problem with these imbalances is financial:

“The euros, pounds and dollars which Germany, Korea et al accumulate inevitably land in the global financial system. There would be no problem – only gains all round – if these monies funded valuable infrastructure, productive factories and other assets which can generate a reasonable economic return.

“Too often, though, though, the extra currency winds up supporting counterproductive finance. It backs ultimately ruinous property speculation, lends support to chronically weak governments, encourages unsustainable consumer spending and destabilises developing economies, not to mention enriching banks and bankers and stimulating corruption. A typical example: the recycled dollars from the U.S. trade deficit helped fund the American housing bubble whose pop created the 2008 crisis.”

But what Hadas – and so many others – fail to do is explain adequately why deficit countries (like the United States) make such dangerously shortsighted choices with their windfalls. Three main (and not mutually exclusive) reasons have been served up. First, financial systems in the deficit countries (especially the United States, which runs the biggest deficits) have over-rewarded uses of capital that produce the fastest possible payoffs, and under-reward longer-term projects. The result is too much investment that encourages speculation, financial monkey business, and simple consumption, and too little investment that builds factories and laboratories and funds other activities that create wealth more slowly, but on a more sustainable basis.

Second, such irresponsible uses of capital have become practically inevitable if only because the deficits have been so enormous, and so much money has become available. When anything is in such abundance, and therefore costs so little, most economists would agree that there’s little reason to use it carefully. After all, it looks like a sure bet that more of that thing at very attractive prices will be readily available.

A somewhat different version of this argument has to do with what economists call “moral hazard.” It argues that the American financial system used over-abundant money so recklessly at least partly because investors felt certain that they’d get bailed out of most or all of their mistakes by government. So why not take maximum advantage of what seems to be a “heads, we win; tails, we lose” proposition?

The third explanation for the irresponsible use of resources focuses on the consumption-heavy nature of the economies of the deficit countries. (This argument also tends to note that the surplus countries frequently try to limit and even depress consumption.) The more capital they take in, in other words, the more such spending (as opposed to productive investment) is likeliest to result either because such behavior is encouraged by government, because a “live for today” has been produced by that country’s culture, or because of some combination of the two.

Whenever something as a big as a global financial crisis strikes, many culprits are responsible. And all of the above explanations should be taken very seriously (along with others, like lax financial regulation). But what Hadas and all the rest continue to miss is how the world trade system, national trade policies, and the trade flows they have fostered have actively fostered in deficit countries like the United States a neglect of productive activities like manufacturing (which is so heavily traded).

Specifically, as Washington in the 1990s and 2000s signed more and more trade agreements structured to encourage multinational companies from all over the world to supply U.S. consumers from locations in super low-cost and virtually unregulated developing countries like China and Mexico, American leaders and other elites (e.g., in the media) naturally sought to rationalize their decisions by spreading the message that sectors of the economy like manufacturing (and the income loss produced by the accelerated offshoring that rippled throughout so much of the Main Street economy) could be neglected with impunity. And the administration of George W. Bush (along with Congress of course) and the Federal Reserve chaired by Alan Greenspan underwrote America’s spendthrift ways with big budget deficits and ultra-low interest rates, respectively.

Even worse, these destructive trends fed on themselves. The more offshoring seemed to pay off, and the more domestic manufacturing operations looked like losing — or at least anachronistic — propositions, the less interested financiers became in investing in them. So the amount of productive activity on which to use incoming capital to start with began shriveling. And the less productive activity available to sustain Main Street living standards responsibly (i.e., mainly through earnings), the greater the political establishment needed to prop up those living standards by providing more easy money — at least if it wanted to stay in power while maintaining the offshoring status quo.

Ironically, even though Hadas emphasizes regulation as the answer to global imbalances, his particular focus has big trade implications:

“Regulation can do more than strengthen bank capital ratios. It can reform the system, so trade surplus funds are not directed to economically counterproductive uses. That will be tough, both politically and practically. But it should be easier – and will be far more helpful – to solidify finance than to try to change the national characters of Germany or Korea.”

I’m all in favor of channeling the use of trade surplus funds by deficit countries into productive activity. In fact, I strongly support requiring such uses by U.S. multinational companies if much-discussed tax reform finally succeeds in persuading them to bring home the vast amounts of earnings they’re currently stashing abroad to avoid paying higher U.S. corporate rates. 

But this requirement needs to be accompanied by (at the very least) strong measures to keep out foreign-made goods that benefit from predatory trade practices like dumping, subsidization, and intellectual property theft. Otherwise, foreign competitors will be able to keep undercutting their domestic American competition in the U.S. market, and these new productive investments will fail. It’s also entirely likely, however, that more sweeping trade curbs will be needed – to offset the scale economy disadvantages created by U.S.-based firms’ inability to sell into so many important markets and their rivals’ ability to sell freely in their home countries and the United States.

And this is in fact where recognition is needed that the trade problem created by American policy concerns not simply inducements to offshore, but the coddling of protectionism in high income countries like Japan and Germany.

The bottom line: As indicated in a post last week, the United States may have to accept that even reasonably balanced foreign trade is not achievable with competitors holding radically different economic priorities (as I argued last week was precisely the case with Germany), and that reducing trade flows is a more than acceptable price to pay for preventing financial crises caused by imbalanced trade. When you add in America’s great capacity for much more self-sufficiency in a wide range of manufactured good, that seems like a more than acceptable trade-off to me. More important, it’s where the Trump administration, admittedly in fits and starts, could be leading us.

(What’s Left of) Our Economy: Why ‘Less Can be More’ in Trade with Germany – & Others

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Angela Merkel, currency manipulation, euro, Eurozone, Germany, mercantilism, non-tariff barriers, public investment, Trade, trade barriers, Trump, wages, {What's Left of) Our Economy

This week’s first meeting – in Washington, D.C. – between German Chancellor Angela Merkel and President Trump is being billed as a confrontation between polar opposites due to apparently clashing positions on immigration, trade, alliances and international organizations, and contrasting personalities. Actually, notwithstanding the penchant of the mainstream media and bipartisan policy establishment for Trump hysteria-mongering, one of the divides between Mr. Trump and Ms. Merkel may actually be more fundamental than recognized. Growing trade tensions might be signaling that the two economies simply aren’t structured to trade with each other in mutually beneficial ways – at least not at current levels.

So far, the mounting trade row – which could already be the most serious since American ire at an allegedly undervalued deutschemark during the Nixon era – has produced a now-predictable policy debate. The Trump administration is accusing Germany’s powerful economy of unfairly benefiting from a euro that’s kept weak because of the economic problems of its partners in the eurozone. As a result, goes the American complaint, its goods enjoy major price advantages over their U.S. competition all over the world for reasons that have little to do with market forces.

Germany and its sympathizers counter that the country simply makes terrific products, especially advanced manufactures, and that its trade barriers are actually on the low side. Another argument raised in Germany’s defense – in part because of a strong inflation-phobia created by the disastrous experience of the 1920s and by the population’s natural frugality, Germans tend to be low spenders and high savers.

All of the pro-German positions have merit. And the Trump administration case is further complicated by Germany’s consistent calls for eurozone economic policies that would tend to strengthen the common currency.

Yet Germany’s free trade record is at the least open to dispute. Although its tariff levels are generally low, like most other U.S. trade partners, it uses a value-added tax that effectively raises the prices of foreign goods headed for its market and reduces the prices of its exports via the rebates they receive. Moreover, even before President Trump took office, the U.S. government repeatedly reported that non-tariff barriers maintained by Berlin “can be a difficult hurdle for companies wishing to enter the market and require close attention by U.S. exporters.” The country’s government procurement market appears to pose special problems. According to the American Commerce Department under former President Obama:

“Selling to German government entities is not an easy process. German government procurement is formally non-discriminatory and compliant with the GATT Agreement on Government Procurement and the European Community’s procurement directives. That said, it is a major challenge to compete head-to-head with major German or other EU suppliers who have established long-term ties with purchasing entities.”

Nonetheless, the more closely the German economy is examined, the less amenable to standard trade policy remedies it looks. For Germany has long decided to create a national economic and business model that seeks both to maximize net exports and depress consumption at home. Two examples should suffice to make the case.

First, although Germany’s is, as frequently noted, a high-cost, high-regulation country, upon adopting the euro, its government put into effect a series of policies that put its labor costs on a much slower growth path than those of the rest of the eurozone and the high income world as a whole (including the United States). As many critics of Germany have charged, the resulting wage repression has overpowered the euro-dollar exchange rate and in fact amounted to an “internal devaluation” that produced the same effects as currency manipulation.

Second, Germany has also limited its consumption levels in part through very low expenses on infrastructure and other public investments. Moreover, according to one former European Central Bank official, the country’s external orientation has been so pronounced that “private investment in Germany’s aging capital stock has been weakened by many German companies’ desire to invest abroad.”

Revealingly, some of the harshest attacks on these and similar German policies have come from the eurozone itself. In particular, members like Greece and other southerly countries have accused Berlin of conducting a mercantilist campaign to grow at their expense by flooding them with exports and denying them comparable opportunities to supply the German market.

Without taking sides in this dispute, it’s clear that because the eurozone is a currency union, its success arguably depends on members conducting both their domestic and foreign economic policies in mutually compatible ways. So in principle, Germany’s eurozone fellows have grounds for complaining about the totality of the German national model. (The reverse holds as well in principle.)

The United States also should be perfectly free to ask Germany to change its priorities. Unlike eurozone members, however, it has no legitimate claims to influence over this vital aspect of German sovereignty. Germans apparently have decided that their choices work for them, and are absolutely correct to insist that aside from the rules of the World Trade Organization or other international legal arrangements, they have no obligations to accede to foreign demands for reform. Berlin, moreover, has a point when it notes that the United States should look to domestic practices of its own that might be hampering its global competitiveness, rather than placing the burden of change on others.

This German argument, however, is not dispositive. After all, if America’s national business and economic model emphasizes consumption and domestic-led growth rather than promoting net exports, that’s a choice that its own political system has been entitled to make. Moreover, it’s a choice that makes considerable sense for a big, continent-sized economy with great potential for more national self-sufficiency in a wide variety of goods and services. Germany has no more right to dictate U.S. preferences than vice versa.

The decisive difference between the two countries is that Germany has been happy with the pre-Trump status quo, and the United States has not. Washington of course has the right to press complaints about possible German violations of world trade law and other trade agreements. But it also needs to recognize that such conventional approaches are dwarfed by the breadth and depth of Germany’s approach to economics. Promoting German reform isn’t likely to work, either – given the above sovereignty concerns, and given the sheer difficulty facing even so powerful a country as the United States in urging domestic reform on another powerful country – especially one that views itself as a success.

So what to do?

First, in general terms, understand that, however legitimate Germany’s sovereign decisions, they create problems to which the United States is equally entitled to respond

Second, without continuing to hector or nag Germany, figure out the most effective response and act accordingly.

Third, depending on Germany’s counter-moves, decide what combination of unilateral carrots, sticks, and negotiations, might achieve progress (including some acceptable compromise), while preserving approximately current levels of trade.

But fourth, recognize along the way that Germany’s legitimate sovereign economic decisions simply may not permit bilateral trade to continue at those levels with acceptable results for the United States. If need be, then, revert to whatever unilateral strategy can preserve or enhance interests America has identified as its own priorities.

The new status quo would put the ball in Germany’s court, and grant it full scope to accommodate the United States if it’s dissatisfied, or make whatever other changes are needed to achieve whatever new objectives it chooses.

In other words, Washington should deal with Germany through an ongoing process of give and take, employing a variety of tactics and tools in flexible, agile ways. The aim would be to capitalize on its considerable leverage but also understand where it can and can’t hope to succeed at acceptable cost and risk. This approach clearly has a less impressive upside than efforts to produce grand bargains, or than more extensive international economic integration schemes — both of which can in theory maximize bilateral commerce. But its very modesty means that it’s less likely to risk angry misunderstandings and consequent major blow-ups, and more likely to result in trade and investment that’s sustainable not only economically, but politically, socially, and culturally.

President Trump can think of this new policy framework as the Less is More Strategy. And he should realize that its usefulness extends far beyond Germany.

(What’s Left of) Our Economy: A Comeback for the U.S. Trade Deficit – & Most (but not all!) of the Usual Suspects

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Canada, China, energy, exports, GDP, Germany, gross domestic product, high tech goods, imports, Korea, Made in Washington trade deficit, manufactures, Mexico, NAFTA, non-oil goods deficit, North American Free Trade Agreement, oil, recovery, Trade, trade deficit, Trump, {What's Left of) Our Economy

America’s goods and services trade deficit recorded a near-double-digit sequential increase in January to hit $48.49 billion. That monthly total was the highest since March, 2012’s $50.22 billion. Combined goods and services exports inched up sequentially to $192.04 billion – their best performance since December, 2014’s $197.46 billion. But total imports grew some four times faster, to $240.59 billion. That total also was the highest since December, 2014 ($241.21 billion).

America’s pre-inflation oil trade deficit spurred much of the total trade gap’s January rise, soaring by nearly 25 percent sequentially to $7.56 billion – the highest level since July, 2015’s $8.01 billion. An 18.37 percent surge in imports to $16.87 billion, the highest total since January, 2015’s $19.63 billion produced much of this result. But the huge, chronic U.S. manufacturing trade deficit also shot up in January – from $69.52 billion to $75.54 billion. And following a record December monthly plunge in its volatile trade balance, the shortfall in high tech goods more than doubled in January, to $8.46 billion.

The massive and longstanding American merchandise deficit with China rebounded by nearly 13 percent in January from a nine-month low to reach $31.30 billion. The main culprit – the biggest decrease in monthly goods exports to China (13.37 percent) since last January’s 18.87 percent plunge. The goods gap with NAFTA partner Canada jumped by more than 68 percent on month, to $3.62 billion. And the merchandise deficit with free trade partner Korea more than doubled, from a nearly two-year low, to $2.59 billion. Yet the U.S. merchandise deficit with Germany — whose big global surpluses have just been targeted by the Trump administration — hit its lowest level ($4.88 billion) since last February ($4.51 billion), and that with Mexico shrank by just over 10 percent, to $3.95 billion. That was its lowest level since July, 2015 ($3.71 billion).

Most troubling, however, the Made in Washington trade deficit – the gap in goods other than oil that is heavily affected by U.S. trade policy – rose by more than five percent on month to hit $61.43 billion. That total, the highest since March, 2015’s $61.90 billion, signals that the trade drag on the already sluggish current American economic recovery will increase further in the first quarter of this year.

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

>In January, the U.S. trade deficit hit $48.49 billion – its highest monthly level since March, 2012’s $50.22 billion.

>The January total represented a 9.56 percent increase over the December total, which was adjusted only fractionally downward, to $44.26 billion.

>Combined goods and services exports of $192.09 billion represented a 0.56 percent increase over the upwardly revised December figure of $191.01 billion – and the highest monthly result since December, 2014’s $197.46 billion total.

>But combined goods and services imports grew by 2.26 percent in January, from an upwardly revised December level of $225.27 billion to $240.59 billion. That total was also the highest since December, 2014 ($241.21 billion).

>Much of the January trade deficit increase resulted from a 24.72 percent monthly pop in the current-dollar U.S. oil trade deficit. The $7.56 billion total was the highest since July, 2015’s $8.01 billion.

>Pre-inflation oil exports increased by 13.68 percent on month in January, from $8.20 billion to $9.32 billion. But imports surged by 18.37 percent – from $14.26 billion to $16.87 billion. That was their highest total since January, 2015’s $19.63 billion.

>But January’s poor U.S. trade performance was also fueled by an 8.66 percent increase in the massive and chronic manufacturing trade gap, from $69.52 billion to $755.54 billion.

>Manufactures exports sank by 7.02 percent sequentially in January, from $89.36 billion to $83.09 billion. But manufactures imports dipped by only 0.16 percent, from $158.88 billion to $158.62 billion.

>Within manufacturing, the high tech goods deficit worsened dramatically in January, as the monthly shortfall rebounded from a record (71.78 percent) sequential drop in December, to $3.82 billion, to $8.46 billion – i.e., a more-than-doubling.

>U.S. high tech goods exports plummeted in January by 18.93 percent – from $32.18 billion in December to $26.06 billion. Imports, however, declined by only 4.11 percent, from $36.00 billion to $34.52 billion.

>The wider January trade deficits in manufacturing and high tech goods were no doubt linked to the 12.78 percent increase in the American merchandise trade shortfall with China – from $27.76 billion in December (the lowest such figure since last April’s $24.31 billion) to $31.30 billion.

>U.S. goods exports to China fell by 13.37 percent on month in January – from $11.63 billion to $10.07 billion. That was the biggest sequential decrease since last January’s 18.87 percent. U.S. goods imports from China hit $41.38 billion – a 5.07 percent rise from December’s $39.38 billion.

>America’s merchandise deficit with Canada skyrocketed in January by 68.37 percent, from $2.15 billion in December to $3.62 billion. U.S. goods exports to this North American Free Trade Agreement (NAFTA) partner fell 2.35 percent on month, but imports advanced by 4.17 percent.

>The goods deficit with bilateral free trade partner Korea more than doubled in January, from $1.20 billion (the lowest such total since February, 2014’s $1.08 billion) to $2.59 billion. America’s merchandise exports to Korea ticked up by 0.27 percent on month, but its merchandise imports were up 8.91 percent.

>Since the bilateral trade deal went into effect in March, 2012, the U.S. merchandise deficit with Korea has roughly quintupled on a monthly basis.

>By contrast, even though the Trump administration has recently criticized Germany’s burgeoning global trade surpluses, the American merchandise deficit with that country actually shrank on month by 8.72 percent to $4.88 billion.  That was its lowest level since February, 2014 ($4.51 billion).

>Similarly, the United States’ merchandise deficit with its other NAFTA partner, Mexico, fell by 10.13 percent, from $4.39 billion to $3.95 billion. That’s its lowest level since July, 2015 ($3.71 billion).

>At the same time, the 5.21 percent monthly rise in the January real non-oil U.S. goods deficit of $61.43 billion – the biggest such total since March, 2015’s $61.90 billion – spells trouble for American economic growth in the first quarter of this year. This Made in Washington deficit – which strips out areas like energy and services, which are only slightly impacted by American trade policies – influences the most closely followed gross domestic product figures, which are inflation-adjusted.

>Although the final fourth quarter 2016 results are not yet available, preliminary figures so far show that the strong growth of this policy-shaped trade deficit has slowed the cumulative pace of the nation’s historically weak economic recovery by fully 20.56 percent – or $434.78 billion.

(What’s Left of) Our Economy: New Trade Figures Full of (Odd) Surprises & (Mainly Dubious) Records

Tags

Census Bureau, China, currency, exports, Germany, high tech goods, imports, inflation-adjusted growth, Japan, Korea, Made in Washington trade deficit, manufacturing, Mexico, non-oil goods trade deficit, recovery, Trade, trade deficit, Trump, {What's Left of) Our Economy

America’s goods and services trade deficit decreased 3.21 percent in nominal terms on month in December – even though inflation appears to be rising and the fourth quarter real deficit rose at its fastest rate (14.82 percent) since early 2010. In fact, in pre-inflation terms, the quarterly deficit was up only 12.95 percent sequentially. In addition, despite a slowdown in U.S. economic growth, the overall trade deficit edged up on-year by 0.38 percent, to $500.25 billion. In 2016, both combined and goods imports both recorded their first consecutive annual decreases since the current Census historical series begins (1960). In addition, both categories of exports fell in 2016 for the second straight year for the first time since 2002.

December combined goods and services exports rose to their highest level since January, 2015, but total imports hit a post-March, 2015 high. Fueling much of the December sequential improvement was a double-digit drop in the huge and chronic manufacturing trade deficit, and the biggest all-time fall in the volatile high tech goods shortfall (71.78 percent) that was generated largely by the sector’s best-ever monthly exports ($32.18 billion). The goods deficit was down 1.64 percent on year, but the long-time surplus the nation has run in services trade decreased by 5.48 percent – its first such fall since 2003.

Trade with countries possibly targeted by President Trump for new negotiations or unilateral U.S. tariffs turned in a mixed 2016 performance, as American goods deficits rose slightly with Mexico and Japan, and fell with China and Germany. But all these imbalances remained at lofty levels historically. The monthly shortfall with free trade partner Korea, however, hit its lowest level since February, 2014. Nonetheless, the December figures revealed a dramatic rise in the trade drag on America’s sluggish economic recovery.

Most troubling, as of year-end 2016, the Made in Washington deficit had reduced cumulative inflation-adjusted growth during the recovery by 20.56 percent, or $434.78 billion.

Here are selected highlights of the latest monthly (December) and full-year trade balance figures released this morning by the Census Bureau:

>A monthly 3.21 percent drop in the December goods and services trade deficit led off a series of surprises produced by the new monthly U.S. trade figures – which also presented the first full-year results for 2016.

>The December sequential decrease – to $44.26 billion from an upwardly revised $45.73 billion November level – yielded a rise in the nominal fourth quarter 2016 trade gap of 12.95 percent. That’s less than the 14.82 percent surge in the real trade deficit in that fourth quarter reported in the latest gross domestic product figures – even though inflation in the United States appears to be heating up.

>Also puzzling in the new trade figures – the annual increase of the combined goods and services shortfall (albeit by only 0.38 percent, to $500.25 billion) despite a slowing overall economy.

>The new records and multi-year highs and lows revealed in this morning’s trade figures start on the import side. Both combined imports and goods imports fell in 2016 for the second straight year. Such declines have not been seen since 1960 – when the Census Bureau’s current historical statistics series begins.

>The former reached $2.712 trillion in 2016 – the lowest such level since 2011 ($2.676 trillion). The latter reached $2.210 trillion – also the lowest such level since that year ($2.240 trillion).

>Combined exports also fell for the second straight year in 2016 – by 2.34 percent – and totaled $2.209 trillion. The last time such a back-to-back decline was experienced was in 2002. And the 2016 level was the lowest since 2011 ($2.127 trillion).

>Goods exports on an annual basis fell consecutively for the first time since 2011 as well. In 2016, they were off by 3.31 percent, and hit $1.460 trillion. That’s the lowest such level since 2011 as well ($1.499 trillion).

>Meanwhile, the slight deterioration in the annual overall 2016 trade deficit resulted largely from an unusual source – the first drop in the services trade surplus (by 5.48 percent, to $247.82 billion) since 2003.

>In 2016, services exports dipped by 0.17 percent, to $749.58 billion. But the drop was the sector’s first since 2009. Services imports, meanwhile, hit an all-time high of $501.75 billion – up 2.68 percent from 2015 levels.

>The goods deficit in 2016 fell for the first time since 2013 – by 1.64 percent, to $750.07 billion.

>Total exports increased in December on a monthly basis by 2.71 percent, from a downwardly adjusted $185.65 billion to $190.69 billion. That’s the best total since January, 2015’s $191.97 billion.

>Total imports rose more slowly – by 1.54 percent, to $234.95 billion from an upwardly adjusted $231.38 billion. But that total was the highest since March, 2015’s $238.64 billion.

>Fueling much of the December monthly improvement was the biggest monthly drop in America’s volatile high tech goods deficit on record – a 71.78 percent plunge from $13.53 billion to $3.82 billion.

>High tech goods exports shot up sequentially by 15.80 percent to a monthly all-time high of $32.18 billion. Imports were off by 12.87 billion on month, to just over $36 billion.

>The broader manufacturing sector enjoyed a good December, too. The monthly deficit fell from a record $80.75 billion in November to $69.52 billion – an improvement of 13.91 percent.

>Even better, the manufacturing trade gap shrank because imports fell on month in December by 4.71 percent and exports advanced by 3.91 percent.

>On year, however, manufacturing’s trade performance deteriorated again. The annual trade deficit rose by another 3.25 percent to $861.82 billion – its latest annual record.

>Manufacturing exports declined by 4.71 percent, to $1.051 trillion, but imports were off only 1.71 percent, to $1.913 trillion.

>U.S. trade partners who have attracted the ire of President Trump could take some solace from this morning’s trade figures.

>The longstanding and enormous U.S. goods trade deficit with China fell by 5.48 percent on year, from $367.13 billion to $347.04 billion. Both U.S. merchandise imports from and exports to the still strongly growing Chinese economy decreased on annual basis – by 4.23 percent and 0.26 percent, respectively.

>The merchandise trade shortfall with Germany – whose currency policies, like China’s, have been criticized by the Trump administration – was down as well on year, by an even greater 13.34 percent, from $74.85 billion to $64.87 billion. U.S. goods exports to Germany slipped by 1.22 percent but goods imports sank by 8.49 percent.

>>The decline in the U.S. goods trade deficit with Korea, with which a free trade agreement went into effect in 2012, was 2.29 percent, from $28.31 billion to $27.67 billion. This total was still the second highest on record. Both U.S. goods exports to and imports from Korea decreased – by 2.71 percent and 2.55 percent, respectively.

>Some of the improvement in Korea trade resulted from the nearly 50 percent monthly plummet in the December goods gap. The $1.20 billion figure was the lowest since February, 2014’s $1.08 billion.

>Yet the merchandise trade gap with Mexico rose – by 4.17 percent, from $60.66 billion to $63.19 billion. U.S. goods exports – many of which are intermediate goods that are re-imported as final products – inched down by 2.03 percent while imports were down by only 0.76 percent.

>America’s merchandise trade deficit with Japan climbed fractionally, to $68.94 billion in 2016, as goods exports advanced by 1.32 percent and the much greater volume of goods imports grew by 0.64 percent.

>Unfortunately, the new trade data showed that trade’s drag on the U.S. economy increased significantly in 2016. In particular, the inflation-adjusted increase in the Made in Washington deficit (the non-oil goods deficit) since the current recovery began in mid-2009 has cut cumulative inflation-adjusted growth during this sluggish expansion by fully 20.56 percent. That translates into $434.78 billion of real output lost because of America’s trade performance in those areas most heavily affected by trade deals and related policies.