(What’s Left of) Our Economy: New U.S. Figures Show That a Trumpian Trade Boom Could Follow Trump

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aerospace, automotive, Boeing, CCP Virus, Census Bureau, China, consumer electronics, coronavirus, COVID 19, goods trade, healthcare goods, manufacturing, merchandise trade, Phase One, recession, services trade, Trade, trade deficit, travel, Wuhan virus, {What's Left of) Our Economy

As usually the case when the U.S. government’s data keepers, in their infinite wisdom, decide to issue several sets of important statistics on the same day, I prioritized the monthly jobs report in last Friday’s blogging. After all, it may be the nation’s single most closely followed economic indicator.

But that doesn’t mean that the monthly trade figures released on the same day deserved to be overlooked. In fact, they were unusually interesting for making clearer than ever how these numbers have been thoroughly distorted this year – and for the worse, in terms of America’s trade deficits – by the CCP Virus’ impact on the U.S. and global economies. The effects were especially evident in aerospace trade, which has suffered both from the virus’ decimation of much air travel around the world, and from the lingering damage inflicted by Boeing’s safety woes.

At the same time, these distortions also both point to a big silver lining for U.S. trade and especially the country’s manufacturing sector – especially if apparent President-elect Joe Biden is smart enough to keep most of President Trump’s tariffs in place. For if these trade curbs – highly concentrated on Chinese goods – remain largely on the books, not only will the pandemic’s eventual  (vaccine-induced?) end and recent steps toward returning Boeing’s troubled 737 Max model to the air boost the huge aerospace sector tremendously. In addition, domestic industry will be able to keep making progress filling the demand gap that’s clearly been left by the absence of Chinese products in the U.S. market, and capitalizing on Beijing’s commitment under the Trump Phase One trade deal to increase its imports from the United States.

As for the new monthly trade data – which cover October – one of the biggest stories concerned the revisions of September data, which dramatically changed the overall trade deficit number, and which stemmed almost entirely from astounding new services trade figures.

October’s combined goods and services trade deficit came in at $63.12 billion, according to the Census Bureau analysts who monitor the nation’s trade flows. On the surface, that represented a 1.68 percent increase over September’s total, and continued a troubling pattern of the overall trade gap continuing to widen even though the CCP Virus and associated business and consumer restrictions keep depressing U.S. economic growth dramatically.

Indeed, the October monthly total deficit was the second highest figure recorded since July, 2008’s $66.99 billion. And on a year-to-date basis, this shortfall is now 9.50 percent bigger in 2020 than in 2019.

But that September trade gap itself was revised down from the previously reported $63.86 billion – a huge 2.79 percent adjustment. And all that revision and much, much more resulted from re-estimates of the service trade numbers – where the surplus was revised up from $16.82 billion to $18.69 billion. Even given the relative difficulty of measuring any service sector economic activity, that 11.10 percent revision is nothing less than a mind-blower.

Underscoring the virus effect on all the service sub-sectors that go into economic activity, and on the travel industry in particular, the October service surplus of $18.29 billion was a 2.17 percent sequential decline, and the smallest such figure since August, 2012’s $17.08 billion. And through the first ten months of this year, the service surplus has shrunk by 15.60 percent.

The monthly and year-to-date moves in goods trade haven’t been nearly as big. This deficit did hit $81.41 billion in October (the second largest such total ever, after August’s $83.90 billion). But the monthly increase was only 1.28 percent, and year-to-date this merchandise gap has risen by a mere 1.28 percent.

Still, it’s legitimate to ask why the goods trade gap has risen at all with the economy still exiting (however rapidly in the third quarter) its deepest downturn since the Great Depression of the 1930s. It’s also legitimate to ask whether this increase despite a major (14.01 percent) drop in the year-to-date China goods deficit means that the Trump tariffs simply shifted this shortfall to other countries.

Given China’s burgeoning power and its growing aggressiveness around the world, the strategic benefits of such “trade diversion” to much less threatening countries shouldn’t be minimized. But in purely economic terms (which matter considerably), the Trump policies appear to be nothing more than a wash, and a disruptive one to corporate supply chains.

And this is where the aerospace sector comes in. From January-October, 2019 to the same period this year, the U.S. surplus in civilian aircraft, aircraft engines, and non-engine aircraft parts combined has plummeted by $43.48 billion. Had it simply remained at its 2019 levels, the huge, chronic U.S. manufacturing trade deficit – a major measure of domestic industry’s health as the Trump administration and many others, like me, see it – would be down on a year-to-date basis by five percent, rather than up by 3.22 percent.

As for the combined goods and services deficit, had the aerospace surplus not worsened, it would have increased by only 0.63 percent (to $493.21 billion), not 9.50 percent (to $536.69 billion). And if the services surplus remained the same rather than plunging by $37.26 billion, the year-to-date total trade deficit would look even better. In fact, the total trade gap actually would have shrunk during this period by 6.97 percent, to $455.95 billion.

Not that the Trump tariffs have solved all of U.S. manufacturing’s trade, or the nation’s overall trade woes. In October, industry still recorded its biggest monthly deficit ever ($110.20 billion) even though the aerospace surplus soared by nearly 36 percent sequentially. The big automotive and consumer electronics products deficits kept growing, and although detailed enough October data haven’t been posted yet, so, too, surely have been the shortfalls in protective and other pandemic-related medical equipment.

But the good October aerospace numbers indicate that this trade-crucial sector is already starting to reverse its fortunes, and as the pandemic subsides, the services trade surplus should return to normal levels as well. If a Biden administration keeps its promises to reshore crucial medical- and national security-related supply chains, the manufacturing trade balance will clearly benefit as well. And if, as he’s indicated he will, the former Vice President holds off on lifting the Trump China tariffs, and keeps the Phase One deal in force, domestic industry could be headed for salad days not only in trade terms, but on the production and employment fronts as well.

(What’s Left of) Our Economy: CCP Virus-Era U.S. Trade Figures Continue to Astound

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CCP Virus, coronavirus, COVID 19, exports, GDP, goods trade, Great Recession, gross domestic product, imports, inflation-adjusted growth, real GDP, real trade deficit, services trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

Meet the new third quarter U.S. gross domestic product (GDP) figures. Practically the same as the old third quarter figures – including on the trade front. The nearly identical 33.1 percent inflation-adjusted annualized growth revealed in today’s second official look at the economy’s performance between July and September remains as meaningless in terms of the fundamentals as it is breathtaking.

After all, it’s completely distorted by the CCP Virus pandemic and resulting shutdown-like decisions and altered consumer behavior that now seem likely to end sooner rather than later due to recently announced vaccine progress. (More industry-specific shifts involving sectors like higher education and business travel and real estate and on-line shopping and the like? They’re of course shaping up as very different stories.)

But it’s worth reviewing the trade highlights of this morning’s figures (and the very similar numbers reported last month) to show just what incredible statistical outliers the pandemic and the government and consumer responses have produced.

The after-inflation quarterly trade deficit came in at $1.0164 trillion at an annual rate – a little worse than the $1.0108 trillion initially estimated. But that’s a staggering 31.13 percent increase from the second quarter total of $775.1 billion – a jump that positively dwarfs the previous record increase of 13.18 percent between the first and second quarters of 2010.

And keep in mind that jump came as the nation was rebounding from the Great Recession – which at that point was its worst economic slump since the Great Depression. Indeed, as reported last month, that quarter’s annualized growth rate was only 3.69 percent – only about a ninth as strong.

Because this year’s third quarter real trade deficit increased slightly while the economy’s growth remained essentially the same (for the record, the new GDP increase number was fractionally smaller than last month’s advance read), the hit to growth from that trade gap rose as well. Its subtraction from growth is now judged to be 3.18 percentage points, not 3.09. Only the 3.22 percentage points cut from growth in the third quarter of 1982 have bit deeper in relative terms.

The bigger trade deficit figure resulted from total imports that rose faster than exports. Last month, the Commerce Department estimated that the former were 12.42 percent greater than the second quarter level. Now the increase is pegged at 12.56 percent. The previous quarterly total import growth figure – which in absolute terms is much bigger – has been increased from 17.58 percent to 17.89 percent.

But where these changes stand in U.S. trade history is nothing less than stunning. The quarterly total import data go back to 1947, and their growth in the third quarter of this year was the strongest since the 21.88 percent recorded in the second quarter of 1969.

The quarterly total import statistics also began in 1947, and on this count, the third quarter’s increase was the worst since the 23.47 percent surge in the third quarter of 1950. These latest trade performances are all the more eye-opening upon realizing that overall U.S. trade flows in 1969 and 1950 were so much smaller than they are today, meaning that big percentage increases were much easier to generate.

The quarterly real trade figures for goods and services individually only go back to 2002, but although the timeframes are much shorter, they’re equally special. During the third quarter of this year, the sequential improvement in goods exports is now reported as 19.60 percent. That’s an all-time high that far surpasses the next best performance – the 6.94 percent advance achieved in the fourth quarter of 2009, during the recovery from that previous Great Recession.

Goods imports in the third quarter soared by 20.08 percent – again dwarfing the previous record of 5.67 percent not-so-coincidentally also recorded in that fourth quarter of 2009.

The story with services trade – which has received an historic blow both nationally and globally from the virus and the shutdowns – interestingly is somewhat less dramatic for the third quarter. Constant dollar services exports only inched up by 0.21 percent in the third quarter, from $582.1 billion annualized to 583.3 billion. These industries clearly are still reeling from the 20.27 percent sequential export collapse they experienced between the first and second quarters, and the 5.67 percent drop between the fourth quarter of 2019 and the first quarter of this year. As a result, these exports in real terms are sitting at their lowest levels since the second quarter of 2010.

Price-adjusted services imports rose a much faster 5.91 percent after inflation between the second and third quarters. But that increase was only the second biggest on record – after the 7.04 percent jump in the third quarter of 2003. These more modest historical changes reflect the impressive growth in services trade for most of this century – albeit from a base much smaller than that of goods trade.

Please keep in mind that the individual goods and services trade figures still don’t add up to the totals, as I first reported in September. But they’re not that far off, either, which means that the overall third quarter numbers still seem reliable enough, and still confirm how unusual CCP Virus-era trade flows have been – and are likely to be until the nation reaches the Other Side.

(What’s Left of) Our Economy: Through the Pandemic Fog, Signs of Trump Trade Progress Keep Coming

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(What's Left of) Our Economy, aircraft, Boeing, CCP Virus, Census Bureau, China, coronavirus, COVID 19, exports, goods trade, healthcare goods, imports, Made in Washington trade deficit, manufacturing, manufacturing trade deficit, medical devices, non-oil goods trade deficit, pharmaceuticals, services trade, tariffs, Trade, trade deficit, trade war, Trump, Wuhan virus

Proof positive that much of the U.S. government grinds on whatever the political tumult surrounding it: Despite the controversies that erupted due to the largely unexpected, still-incomplete, and increasingly contested Presidential election results, the Census Bureau nonetheless still put out the new monthly U.S. trade report yesterday – this one taking the story through September.

And by the bizarro economic standards of the bizarro CCP Virus era, the figures were strangely normal: The various September deficits remained awfully high given an economy whose levels are still markedly subdued despite a powerful growth rebound in the third quarter (which ended in September). Yet although these results have been widely interpreted as a stinging rebuke to effectiveness of President Trump’s tariff-centric trade policies (see, e.g., here and here), widely overlooked details reveal major mitigating developments – and resulting reasons for continued encouragement.

As for the awfully high deficits: The combined goods and services trade gap actually decreased on month by 4.73 percent, from a downwardly adjusted $67.04 billion to $63.86 billion. Yet this monthly total (during a troubled economic time) was still firmly in the neighborhood of trade shortfalls during the bubbly mid-2000s, when Washington’s trade policy was about as cluelessly import- and especially China-friendly as possible.

Moreover, back in those days, oil made up a much bigger share of the total goods deficit than today. So obviously, most of the remaining gap owes a good deal to U.S. trade policy decisions – as will be seen below.

Encouragingly, total U.S. exports to a world still largely struggling with virus-related downturns of its own were up 2.55 percent sequentially in September, and registered their best performance ($176.35 billion) since March – just as major pandemic effects were taking hold. Total September imports of $240.22 billion also represented the highest amount ($240.22 billion) since March, but the monthly increase was only 0.51 percent. And where export growth has consistently been strong since May, import growth has begun slowing markedly.

Yet the persistence of high combined goods and services U.S. trade shortfalls stems mainly from problems with services trade that are clearly CCP Virus-related. For example, the longstanding services surplus (which of course includes travel services) is on track for its biggest drop since recessionary 2001. So far, through the first three quarters of 2020, it’s sunk by 20.47 percent on a year-to-date basis.

Indeed, the $43.96 billion reduction in the services surplus has been greater than the $38.54 billion increase in the overall deficit – meaning that if the service surplus had simply remained the same, the total deficit would have declined year-to-date (although still less than expected at least during a normal deep recession).

As indicated above, however, the total trade numbers don’t tell the whole story about the successes or failures of trade policy. That’s because, as known by RealityChek regulars, services are one huge sector where trade agreements and similar decisions have had relatively little impact so far. Ditto for oil

At first glance, examing trade flows that are substantially “Made in Washington” also reveals a nice-sized monthly September reduction in that deficit (4.62 percent), but to a level that’s the third worst on record ($80.74 billion) – just behind the August and July totals, respectively. And on a year-to-date basis, the Made in Washington deficit is up 3.80 percent from last year,to $663.55 billion.

Yet here’s where another detail comes in. This entails the woes of Boeing, which have spread beyond the safety debacle stemming from crashes of its popular 737 Max model to the global virus-induced collapse in air travel.

The safety problems of 2019 cut the longstanding U.S. civilian aircraft trade surplus by nearly 28 percent, or $8.86 billion on a January-September basis. Had the surplus stayed stable, it would have risen only from $600.08 billion during the first three quarters of 2018 to $630.39 billion, rather than $639.25 billion. Given all the import front-running seen throughout 2019 to try to avoid the Trump China tariffs (which artificially inflated the entire non-oil import total), that’s not a bad performance at all.

The aircraft effect has been much more dramatic this year. Year-to-date through September, the Made in Washington deficit is up from that $630.29 billion to $663.55 billion. Yet the nosedive in the aircraft surplus (all the way from $23.16 billion to just under $3 billion) accounts for nearly 83 percent of that increase.

Want another aircraft effect? Check out the manufacturing trade deficit – so rightly the focus of the President’s attention. Month-to-month, it rose by only 1.46 percent. But the new September level of $103.87 billion is the second-worst monthly total of all time – just behind July’s $104.63 billion. Even worse: The aircraft industry’s problems didn’t add to this number, since its trade deficit actually shrunk slightly on month.

But for the entire year so far, the plunge in the aircraft surplus (which, not so coincidentally, has been mirrored by smaller but not trivial reductions in the surpluses of all sorts of aircraft parts, including engines) has made a sizable difference. From January-September, 2019 to this year’s comparable period, the manufacturing trade shortfall has grown by $10.18 billion, from $777.60 billion to $787.78 billion. Take out the $20.16 billion worsening of the aircraft trade surplus, and the $10.18 billion higher year-to-date manufacturing trade deficit becomes a nearly $10 billion lower year-to-date manufacturing trade deficit.

And when it comes to both the manufacturing and overall Made in Washington trade deficits and a virus effect, don’t forget its healthcare goods component. Specifically, the U.S. trade deficit in pharmaceutical preparations jumped by $12.58 billion year-to-date between last year and this year, and in the categories containing (but not restricted to) protective gear like masks and gowns, testing swabs, ventilators, and oxygen tents by another $2.33 billion.

Since China remains so important for Made in Washington and manufacturing trade flows, bilateral exports, imports, and deficits not surprisingly reveal a major pandemic effect, too. The big China difference is how strongly the September data confirm that President Trump’s goals of reducing the bilateral trade gap and decoupling economically from the People’s Republic are being achieved even without taking the CCP Virus into account.

On a monthly basis, the goods trade gap with China dipped fractionally in September, to $29.67 billion. This total represented the second straight such drop and the lowest level since Aprils $28.40 billion. These merchandise imports inched up sequentially in September by just under one percent and have been virtually flat since July, but goods exports improved by 4.53 percent.

On a year-to-date basis, America’s China trade looks like it’s in even better shape. U.S. goods imports from China are off by nearly 11 percent ($37.54 billion) over this stretch, and the trade gap has become 15.24 percent ($40.06 billion) smaller.

This progress, moreover, has been achieved even though total U.S. exports of civilian aircraft and parts (including engines) to China have shrunk by $4.09 billion and the trade deficit in the virus-related medical equipment categories has risen by $1.25 billion. (Oddly, the bilateral pharmaceutical preparations trade balance has improved with the surplus improving from $449 million to $836 million.)

When all of these virus-related complications and the inevitably disruptive and therefore initial efficiency-reducing impact of the Trump trade policies are considered, two questions arise that are equally fascinating and important. First, once these temporary shocks pass, will this approach to globalization look more like a win or a loss for the U.S. economy? Second, will American election politics give the nation a chance to find out?

(What’s Left of) Our Economy: Some Fishy New Official U.S. Trade Figures

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Commerce Department, exports, GDP, goods trade, gross domestic product, imports, real GDP, services trade, Trade, trade deficit, {What's Left of) Our Economy

Life as a blogger just gets more unpredictable all the time. Here I was this morning all set to try to figure out whether I’d write about the presidential debate last night or about the official new overall U.S. economic growth (actually contraction) numbers or about the official new figures for how domestic manufacturing fared. And I find my interest most piqued by apparent mistakes in those overall data on the shrinkage of the gross domestic product (GDP) in the second quarter.

As RealityChek regulars know, when I cover the GDP figures (which tell us how much in the way of goods and services the U.S. economy has turned out in a given time period, and how it’s changed over time), I tend to focus on the trade numbers that help make up these total figures. And I like to look at revisions, because the U.S. Commerce Department, which tracks these trends, doesn’t get it right the first time, or even the second time (because new information is being constantly received), and because it’s right up front about making these imperfections clear. (That’s why several revisions of these data are issued in the first place.)

Today’s report on the economy’s performance in the second quarter of this year was the third such report, and the final verdict for the time being. (So-called “benchmark” revisions will be coming down the road, going back several years, which speaks volumes about Commerce’s determination to get it right.)

And the “headline” trade number showed that between the first quarter and the second quarter, the total U.S. trade deficit declined from $788.0 billion to $775.1 billion. (All these trade figures are adjusted for inflation and presented at annual rates.) That’s an improvement. But it’s not as much of an improvement as the previous GDP report showed. According to that release, which came out about a month ago, the total second quarter real annualized trade deficit was $760.9 billion.

Or was it?

I can’t recount exactly what spurred me to look into the underlying figures, as opposed to taking the data’s accuracy for granted, as I normally do. But I began to check them out. And here’s what I found for that previous set of second quarter figures.

Last month’s GDP report judged that after-inflation U.S. goods exports for the second quarter totaled $1.3519 trillion annualized and U.S. goods imports were $2.3487 trillion. To get the balance, subtract second number from the first and you get a deficit of $996.8 billion.

For services, the second quarter results were previously reported as price-adjusted exports of $591.5 billion and imports of $372.8 billion. Doing the arithmetic produces a real services trade surplus of $218.7 billion.

To get the total trade deficit, the $218.7 billion services surplus has to be subtracted from the $996.8 billion goods deficit. And that number comes out to -$778.1 billion – not -$760.9 billion.

This difference is by no means major. But if my math is accurate, it reveals a final (for now) inflation-adjusted second quarter trade deficit that improved sligthly over the previously reported figure, rather than worsened.

In other words, the previous GDP report estimated that the second quarter real trade deficit improved on the first quarter’s results by a margin of $788 billion to $760.9 billion. But it looks like it should have reported a much less impressive narrowing – to just $778.1 billion. As a result, the $775.1 billion second quarter trade deficit figure reported this morning is a slightly better number than the incorrect previous estimate – not a worse result, as that incorrectly reported previous number indicated.

But guess what? That latest second quarter figure doesn’t add up, either. Specifically, today’s report pegs combined U.S. goods and services exports at $1.9274 trillion in real terms on an annual basis, with goods exports judged to be $1.3472 trillion and services exports reported as $582.1 billion. Add them up and you get $1.9293 trillion, not $1.9274 trillion.

On the import side, the Commerce Department now says that the second quarter total is $2.7025 trillion annualized, and that it’s comprised of $2.3480 trillion worth of goods imports and $372.1 billion worth of services imports. That adds up to $2.7201 trillion, not $2.7025 trillion. As a result, the total trade deficit was actually $790.8 billion annualized, not $775.1 billion (the difference between the new $2.7201 trillion total import figure and the $1.9293 trillion total export number).

Therefore, not only did the real trade deficit total worsen over the figure reported last month (from $778.1 billion to $790.8 billion, not to the $775.1 billion reported today). It also worsened from the first quarter’s $788.0 billion number.

At which point, it pains me to report that that first quarter total doesn’t add up, either.

The bottom line for me is that I’ll keep reporting the headline trade figures as they’re presented in the GDP reports by the Commerce Department. But I’ll be even more cautious than usual about assuming that they’re even accurate in measuring changes of direction, much less precise amounts. And I’ll be wondering if the rest of the federal government’s economic data is any better – at least until I can figure out what’s going on here.

(What’s Left of) Our Economy: Trump is Winning the Trade and Decoupling Wars

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CCP Virus, China, coronavirus, COVID 19, decoupling, FDI, foreign direct investment, goods trade, merchandise trade, MSCI, non-oil goods trade deficit, pension funds, Rhodium Group, Securities and Exchange Commission, tariffs, Trade, Trade Deficits, trade war, Trump, Wuhan virus, {What's Left of) Our Economy

It’s become increasingly clear in the last few days that President Trump’s trade war with China and his apparent efforts to decouple the U.S. and Chinese economies have achieved real successes. Just why exactly? Because of a recent flurry of claims in the Mainstream Media that the trade war has been an ignominious defeat for the President and his tariffs, and that decoupling can only backfire on America if it’s taken too far (an outcome that’s supposedly imminent). (See here, here, and here in particular.)

As RealityChek regulars know, such media doom- and fear-mongering – spread both by journalists and by the purported experts they keep quoting who have been disastrously wrong literally for decades about trade and broader economic expansion with China – are now well established contrarian indicators. And here’s some of the key data that these proven failures have overlooked.

Let’s start with the least controversial measure of decoupling – two-way trade. Let’s generally use the end of the previous administration as our baseline, since decoupling really is a Trump-specific priority. And let’s generally end with the end of 2019, not only because it’s our last full data year, but because the coronavirus pandemic clearly is distorting the data, and won’t be with us forever (although some of its effects on supply chains and the like might – also because of reinforcement from the trade war). We’ll also stick with goods trade, since detailed service trade figures are always late to come out, and because they’re rarely major subjects of trade policy.

Between 2016 and 2019, combined US goods imports from and goods exports to China actually grew by 2.92 percent. So where’s the decoupling, you might ask? It becomes clear from using economic analysis best practices and putting these figures into context – mainly, the performance of the entire economy.

And in this case and many of those below, it’s crucial to know that the economy grew during this period, too. As a result, in 2016, this two-way goods trade (also called merchandise trade) amounted to 3.08 percent gross domestic product (GDP) – the nation’s total output of goods and services. In 2019, it was down to 2.60 percent. That is, like a supertanker, this trade doen’t turn around right away.

Therefore, it is indeed legitimate to fault Mr. Trump for claiming that trade wars are easy to win. But the supertanker is turning. And the impact on the economy? In 2016, it expanded by 2.78 percent. In 2019? 3.98 percent. So not much damage evident there. (All these figures are pre-inflation figures, because detailed inflation-adjusted trade figures aren’t available.)

Similar trends hold for the U.S.-China goods trade deficit, which the President views as the most important scorecard for his China trade policy success. Between 2016 and 2019 in absolute terms, it barely budged – dipping by just 0.47 percent. That could be a rounding error.

But viewed in the proper context, this trade deficit fell from 1.85 percent of GDP to 1.61 percent. And again, the economy grew much faster in 2019 than in 2016.

It’s still possible to ask what any of the trade decoupling had to do with the President’s ballyhooed tariffs. But the only reasonble answer? “A lot.” That’s because even after the signing of the so-called Phase One U.S.-China trade deal in January, levies of 7.5 percent remain on categories of imports from China that have been totalling about $120 billion annually lately, and tariffs of 25 percent remain on $250 billion more. (That’s most of the $451.65 billion in total goods imported by the United States from China in 2019.)

For comparison’s sake, between 2016 and 2019, the U.S. worldwide non-oil goods trade deficit – that’s the deficit that’s most impacted by trade policy decisions like tariffs, and the portion of the deficit that’s most like US-China trade – rose by 24 percent. That’s more than 50 times faster than the increase in the China goods deficit.

So there can’t be any serious doubt that the Trump China tariffs have worked both directly (by keeping Chinese goods out of the U.S. market) and indirectly (by encouraging companies that had been producing in China for export to the United States to move elsewhere). Moreover, since that “elsewhere” is always to much friendlier countries, that’s a plus for Americans even though the decoupling by most accounts has only returned modest amounts of jobs stateside.

Moreover, there’s a strong case to be made that the Trump tariffs on China have prevented the U.S. economy’s CCP Virus-induced recession from being much worse. That contention is borne out by the fact that, as RealityChek reported earlier this month, the latest available apples-to-apples statistics show that China’s goods trade surplus with the world as a whole had increased by some 25 percent between July, 2019 and July, 2020. But during that period, the China goods surplus with the United State fell by about 18 percent.

As a result, according to the standard way of measuring the economy and how developments in areas like trade affect its growth or shrinkage, China over roughly the last year has been growing at the expense of the world as a whole, but not at America’s. Indeed, quite the opposite. After decades of trade with China slowing U.S. growth, such commerce is now supporting growth.

The decoupling picture, however, wouldn’t be complete without investment flows. Here, on one front, the disengagement has been even more extensive. The consulting firm Rhodium Group does a good job of crunching the numbers on foreign direct investment (FDI) – those transactions that involve so-called hard assets, like real estate and factories and warehouses and entire companies, as opposed to portfolio investment, which involves stocks, bonds, and other financial instruments.

By a happy coincidence, Rhodium has just issued its latest report, which takes us through the first half of 2020. Yes, that covers the virus era, when it’s natural to expect all kind of economic and commercial activity to decline. But the pre-virus era trends will become clear enough, too.

According to Rhodium, two-way FDI flows between the United States and China in the first six months of this year (measured by the value of completed deals) hit their lowest level since the second half of 2011. And the peak came during comparable periods between early 2016 and late 2017 – when these investments were running nearly four times their current levels. Moreover that peak, not so coincidentally, bridged the Obama-Trump transition.

Chinese FDI into the US during that first half of this year actually rose a great deal – from $1.3 to $4.7 billion. But this increase resulted entirely – and then some – from a single purchase by the big Chinese social media company WeChat of a 10 percent stake in the U.S. company Universal Music. Without that transaction, Chinese flows into the US would have dropped, and even the current somewhat artificially high level is only about a fifth as high as its peak – hit in late 2016. So you can see a decided Trump effect here, too.

U.S. FDI flows into China have held up better, if that’s the term you want to use. But they were off 31 percent between the second half of 2019 and the first halfof this year – to $4.1b. And their peak level – hit in 2014 – was $8.5b. So that’s another big Trump-related drop.

One disturbing counter-trend that the Trump administration has been too slow to address: There’s abundant evidence that U.S. financial investment into China – buys of assets like stocks and bonds – keeps surging.

One indication: According to the Financial Times earlier this month, since the Wall Street firm MSCI in June, 2017, first announced plans to include Chinese domestically listed “A-share” companies into one of its widely followed indices, “roughly $875bn in foreign investment has flowed into Chinese equities through stock connect programmes linking Hong Kong with onshore bourses in Shanghai and Shenzhen.”

And although the U.S. share is difficult to quantify, between private investors and state-level government workers’ pension funds, this analysis from the U.S. Securities and Exchange Commission makes clear that it’s considerable.  (Due to Trump administration pressure, the body overseeing federal pension plans’ investments has delayed a decision to channel funds into the aforementioned MSCI index.)   

So can anyone reasonably claim “Mission accomplished” for the Trump trade and decoupling policies? Not yet. But is a “job well done so far” conclusion merited? Certainly for anyone who’s not Trump-ly Deranged.

(What’s Left of) Our Economy: China’s Trade is Killing Global – but not U.S. – Growth

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CCP Virus, China, coronavirus, COVID 19, goods imports, goods trade, goods trade deficit, goods trade surplus, merchandise trade, tariffs, Trade, trade war, Trump, Wuhan virus, {What's Left of) Our Economy

Let’s say you don’t care about America’s still-huge and longstanding trade deficit with China. You should still be up in arms about the trade figures that just came out from the People’s Republic. For they make clear that China this year has been growing at the expense of the rest of the world just as the pandemic it spawned has destroyed massive amounts of income, jobs, and growth around the world.

At the same time, these data should cheer anyone who’s more America First-inclined, since they also provide compelling evidence that President Trump’s tariff-heavy trade policy toward China has delivered considerable benefits to the United States during this crisis.    

It’s a maxim of conventional economics that changes in a country’s trade balance determine its role in adding to or subtracting from global growth. More specifically, national economies whose trade balances are worsening (either because surpluses are shrinking, surpluses have become deficits, or deficits have increased) are adding to output worldwide. That’s because such countries are consuming more of other economies’ output, and therefore expanding the demand for these goods and services, more than their own goods and services are taking share of other countries’ markets.

Improving trade balances (either because deficits are shrinking, deficits have become surpluses, or surpluses are increasing) subtract from global growth because the opposite effects are created.

The China trade data I’m talking about only cover its goods (or merchandise) trade. But since China’s two-way global goods trade (totaling $2.1431 trillion for the first half of this year) is nearly seven times greater than its two-way global services trade ($316.27 billion), it’s clearly worth focusing on.

And here’s what the numbers show: From January through August of this year, China’s goods trade surplus with the entire world added up to $327.92 billion. For the same eight-month period of last year, the number was $262.29 billion. That’s an increase of just over 25 percent, and a growth drag this year’s global econmy can ill afford. (Here’s the source.)

In this vein, it’s more than a little interesting that between January and July, 2019 and January and July, 2020, China’s goods trade surplus with the United States fell by 18.14 percent. (The U.S. figures for August won’t be released until early October.) In other words, merchandise trade with China has added to America’s growth.

Of special importance, year-to-date, U.S. goods imports from China are off by 14.71 percent. Globally, according to this source, imports from China worldwide are down only 4.11 percent. (These last numbers vary, but only in a minor range.) Which seems to be a ringing endorsement of President Trump’s stiff and sweeping tariffs on imports from the People’s Republic. Why else would the pattern of China’s trade with the United States this year differ so dramatically from the pattern of China’s global trade?

Meanwhile, on a net basis, it’s not like other countries are making out like bandits in the wake of China’s weak performance. The total American non-oil goods deficit (which RealityChek likes to call the Made in Washington deficit, because it’s the portion of U.S. trade flows most heavily influenced by trade policy, and which comprise the best proxy for U.S.-China trade flows) is up year-to-date, but only by about a half a percent. And U.S. non-oil goods imports are off by 9.79 percent globally – considerably less than the decrease in imports from China.

It’s true that the pace of U.S. imports from China has picked up lately. Indeed, on a monthly basis, they’ve doubled between March and July – nearly twice the 28.34 percent advance in global imports from China during this period. But given the relatively rapid U.S. economic recovery, it’s legitimate to ask where these trade figures would be with no tariffs. Moreover, it’s way too soon to know into which what kind of post-virus-normal and post-Phase-One-trade deal normal U.S.-China, and China’s global trade flows will settle.

So far, however, the numbers tell a reasonably clear story. During the pandemic, China’s trade has strongly subtracted from global growth with countries that have not launched a trade war, and actually added to growth with the country that has.

(What’s Left of) Our Economy: More Trade Surprises in the New U.S. GDP Report

Tags

CCP Virus, Commerce Department, coronavirus, COVID 19, exports, GDP, goods trade, Great Recession, gross domestic product, imports, real GDP, recession, services trade, shutdowns, trade deficit, Wuhan virus, {What's Left of) Our Economy

First, let’s get the obvious out of the way: The U.S. economy took such a huge hit during the second quarter of this year that the 36.87 percent nosedive in output sequentially at an annualized rate reported this morning by the Commerce Departent was actually slightly good news. Specifically, it represented an improvement over the plunge estimated in last month’s advance read on the gross domestic product (GDP) – nearly 38 percent. Talk about a low bar!

(Just FYI, the above figures differ from what the Commerce Department itself has calculated and the media have reported. Mine are based on taking the second quarter annualized figure (in this case) of $17.2822 trillion in inflation-adjusted terms (the most closely watched of the GDP statistics) subtracting it from the first quarter figure ($19.0108 trillion), and then multiplying by four.)

Now for the less obvious: The GDP figures, which of course are historically awful because of the CCP Virus-induced shutdowns (and therefore maybe not very good measures of the economy’s underlying condition) keep producing noteworthy surprises on the trade front.

Specifically, last month’s initial Commerce Department GDP release pegged the inflation-adjusted trade deficit at $780.7 billion at an annual rate. This morning’s number was down to $760.9 billion. That’s a big revision, and it means that since the first quarter, the gap has narrowed not by the 3.71 percent estimated last month, but 13.76 percent – more than 3.7 times more! This shortfall, moreover, was the lowest since the second quarter of 2016’s $745.2 billion.

Interestingly, the main source of the improvement was on the goods side. Service sectors – which have suffered the most during the pandemic period because so many depend on human contact of some kind or other – saw their trade results barely budge from the previous estimates for the second quarter.

At the same time, let’s not overlook one stunning services trade-related result. As was the case with that previous second quarter services import figure of $372.7 billion annualized, this morning’s $372.8 billion result was the lowest in more than fourteen years, when the fourth quarter 2005 services import figure came in at $368.4 billion.

As for the rest of the components of inflation-adjusted U.S. trade flows (all annualized):

Second quarter U.S. total exports were revised up 0.60 percent, from $1.9316 trillion to $1.9431 trillion. That quarterly total was still the lowest since the first quarter of 2010 ($1.9026 trillion) – early in the recovery from the Great Recession of 2007-09.

Second 2Q total imports were revised down 0.30 percent, from $2.7123 trillion to $2.7040 trillion – the lowest since the third quarter of 2011 ($2.6970 trillion).

Second quarter goods exports were revised up 0.99 percent, from $1.3386 trillion to $1.3519 trillion. But that’s also the lowest such number since the first quarter of 2010 – which was exactly the same!

Second quarter goods imports of $2.3575 trillion represented a 0.37 percent upward revision from the previously reported $2.3487 trillion. That’s the smallest such figure since the second quarter of 2013 ($2.3381 trillion).

Second quarter services exports are now judged to have been $591.5 billion – just 0.12 percent lower than the first estimate of $592.2 billion – and the worst such total since the first quarter of 2010’s $586.8 billion.

And finally, that new second quarter services imports figure of $372.8 billion is virtually unchanged from the previous estimate of $327.7 billion. But again – it’s a nearly 15-year low.

For the time being, there’s one more second quarter GDP estimate to come from the Commerce Department – about a month from now. Then we’ll be getting into the reports for the third quarter, which is widely thought to have witnessed a strong but far from complete rebound in the economy. I for one can’t wait to see if those numbers produce any comparable trade surprises – and if so, what kind.

(What’s Left of) Our Economy: Biggest Mid-Year U.S. Trade Winners & Losers I

Tags

CCP Virus, coronavirus, COVID 19, goods trade, manufacturing, merchandise trade, recession, Trade, Trade Deficits, trade surpluses, Wuhan virus, {What's Left of) Our Economy

It’s June! Or it’s June at least according to the folks at the U.S. Census Bureau who track America’s international trade flows. And the arrival of this mid-year point means it’s a good time to see effectively various segments of the country’s economy are competing in the global economy, including here at home.

As with most of American life, this regular RealityChek exercise has been deeply affected by the arrival of the CCP Virus, and in particular, by the historic recession (and maybe depression) it’s triggered due to widespread lockdowns. But even though the figures below – which cover the nation’s goods industries but leave out services (because the government database I rely doesn’t report on the latter, and because comparably detailed data won’t be released for a while) are seriously distorted by the pandemic, they’re useful for three reasons.

First, they suggest which parts of the economy are holding up better and worse during a public health crisis the likes of which are, scarily, likely to recur more than once down the road. Second, the goods industries examined here (manufacturing, agriculture, minerals, and energy) have been affected less dramatically than most service industries, which depend heavily on various degrees of personal contact with customers. Therefore, the virus distortion isn’t nearly so great as might be initially supposed. Third, since all these goods sectors s have been affected by the CCP Virus, their trade performance could well reveal important information about their underlying strengths and weaknesses.

We’ll focus today on actual trade balances – deficits and surpluses – and how they’ve changed between the first half of last year and the first half of this year. As usual, the figures come from the U.S. International Trade Commission’s terrific Trade Dataweb interactive search engine. The goods categories used are those of the North American Industry Classification System (NAICS) – the federal government’s main way to slice and dice the U.S. economy. And the level of disaggregation I’m using is the sixth, since it’s the level at which you can keep the numbers of sectors analyzed manageable, and at the same time make distinctions between final products on the one hand, and their parts and components on the other (vitally important given much more specialized manufacturing has become).

One anomaly you may notice right away: Although these are both Top 20 lists, they each have more than 20 entries. The reason? Truly bizarre changes in the way the government reports results from the aerospace sector. Once upon a time, Washington used separate NAICS 6 categories for aircraft, non-engine aircraft parts, and aircraft engines and parts. Now they’re all being combined – except where they’re not! The best way I could think of to offset these inconsistencies was to include all the aircraft-related figures when they showed up in the Top 20, but add the twenty-first or twenty-second industry on that list to get the closest approximation of a real Top 20.

Let’s start with those parts of the economy that posted the biggest trade surpluses in the first half of 2020, the actual totals in billions of current (i.e., pre-inflation) dollars, and how this list compares with its counterpart from last year. A dash here means that that sector didn’t appear on the top 20 2019 list at all.

Top 20 2020 trade surpluses                                                          2019 rank

1. civilian aircraft, engines, equipment, parts:        $39.475b              –

2. petroleum refinery products:                               $16.138b              1

3. natural gas:                                                          $12.647b              –

4. other special classification provisions:               $10.927b               2

5. plastics materials and resins:                                $8.720b               3

6. waste and scrap:                                                   $6.403b               5

7. soybeans:                                                             $5.882b                4

8. semiconductors:                                                  $5.748b              12

9. corn:                                                                    $4.678b                9

10. used or second hand merchandise:                   $4.635b                7

11. non-poultry meat products:                              $3.388b              10

12. non-anthracite coal & petroleum gases:          $2.982b                 6

13. motor vehicle bodies:                                      $2.915b                 8

14. wheat:                                                             $2.847b                13

15. semiconductor production equipment:           $2.651b                 –

16. tree nuts:                                                         $1.890b               14

17. prepared or preserved poultry:                       $1.825b               17

18. invitro diagnostic substances:                        $1.653b               18

19. paperboard mill products:                              $1.621b               20

20. surface active agents:                                     $1.614b                –

21. computer parts:                                              $1.586b               15

What jumped out at me right away is that, with three exceptions, the top 20 (actually, top 21) for this year and the list last year were identical. Only three sectors – natural gas, semiconductor production equipment, and surface active agents were newcomers to the 2020 list. And shuffling around between these groups was pretty mimimal. Eight of the sectors either maintained their exact same rank between 2019 and 2020, or only moved one spot. Three more moved only two spots. Given the stunning disruption of life in the United States all around the world, those results seem remarkably stable – and indicate that this group of big American trade winners boasts impressive resilience.

From another vantage point, ten of the 21 sectors on the list were manufacturing industries. In 2019, manufacturing placed only eight representatives in the top 21. So for manufacturing fans (as everyone who’s hoping for enduring American prosperity should be), 2020 has been a year of progress so far.

Below are the goods sectors of the economy with the 21 biggest trade deficits.

Top 20 2020 trade deficits                                                           2019 rank

1. autos and light trucks:                                        $42.120b             1

2. goods returned from Canada:                            $39.008b             2 

3. pharmaceutical preparations:                            $34.867b              4

4. computers:                                                         $29.647b             5

5. broadcast & wireless communications equip:  $26.848b              3

6. smelted/ refined non-ferrous non-alum metal: $19.228b              –

7. miscelleaneous extruded non-ferrous metals:  $15.885b              –

8. women’s cut and sew apparel:                          $14.691b             6

9.crude oil:                                                           $13.658b              –

10. non-diagnostic biological products:              $12.486b            14

11. men’s cut and sew apparel:                              $9.706b              7 

12. printed circuit assemblies:                               $9.571b            15 

13. footwear:                                                         $9.276b              9

14. miscellaneous motor vehicle parts:                 $9.176b            10 

15. miscellaneous textile products:                       $8.892b             –

16. aircraft engines and parts:                               $8.709b             8

17. audio and video equipment:                            $8.107b            11

18. major household appliances:                           $6.801b             –

19. medicinal & botanical drugs & vitamins:       $6.651b             –

20. iron and steel products:                                   $6.460b             –

21.miscellaneous plastics products:                      $6.454b           20

One big difference between this list and the trade surplus list: Fully seven industries this year are newcomers. Even so, however, of the 13 sectors that made it onto both lists, shuffling was actually more limited as on the trade surplus list. Nine of them either held the same ranking or only moved one rung up or down the latter.

This trade deficit list, however, is much more manufacturing-heavy than the surplus list. In fact, it’s nearly twice as manufacturing-heavy, with such sectors accounting for 19 of the 21 on each A final, discouraging, difference: The trade deficits of the leading deficit industries are much bigger than the surpluses of the leading surplus industries. That’s a good reminder that even though the overall goods trade deficit (also called the merchandise trade deficit) is down 5.15 percent on a year-to-date basis so far, it was still more than $391 billion.  Similarly, although the manufacturing deficit is down 4.53 percent on a year-to-date basis, it’s still come in at $476.90 billion so far in 2020.  

But we’re far from finished analyzing the year-to-date trade flows. When it comes to trade balances, we still need to look at more dynamic figures – that is, at which sectors have seen the greatest improvements in their trade balances, and which have seen the greatest deterioration. And of course we can’t forget the export and import figures that comprise the trade balance data, and how they’ve changed between January and June of last year and January and June of this year. Keep checking in with RealityChek for those results!

(What’s Left of) Our Economy: A Big China Mystery Inside the Latest U.S. Trade Figures

Tags

China, exports, goods trade, imports, merchandise trade, non-oil goods trade deficit, Trade, trade deficit, U.S. International Trade Commission, {What's Left of) Our Economy

The big mystery about yesterday’s monthly U.S. trade report (for May) concerns China. Specifically, why are imports from the People’s Republic streaming into the American economy again, considering the stiff, sweeping tariffs on hundreds of billions of dollars worth of Chinese-made goods destined for U.S. markets, and of course the continuing troubles faced by the U.S. economy from the CCP Virus?

I won’t be able to provide a detailed answer till sometime next week – when I expect the U.S. International Trade Commission to post the data on its website. But I can say right now that these imports were great enough account for more than all of the blame for $4.85 billion (9.74 percent) sequential widening of the overall U.S. trade gap in May.

That combined goods and services trade shortfall hit $54.60 billion – its highest level since October, 2008’s $60.88 billion. And back then, more than half that overall trade deficit was oil. In May, the United States ran an oil trade surplus – as it’s done since last fall.

Moreover, the overall May U.S. goods trade deficit (also known as the merchandise deficit) of $76.06 billion was the biggest such total since December, 2018’s $80.21 billion –and represented a $4.24 billion (5.90 percent) increase from April’s levels.

The specific China goods numbers? The bilateral trade gap widened by $4.49 billion (19.99 percent) sequentially in May – a figure 92.58 percent as big as the entire monthly U.S. trade deficit increase and, as mentioned above, greater than the monthly increase in the merchandise shortfall. In other words, as the goods trade deficit from everywhere else in toto fell during May, it rose from China. (Of course, because the U.S. trades with so many different countries, this doesn’t mean that goods trade shortfalls fell with every one of them other than China. But overall, the non-China goods trade gap narrowed.)

And the role of merchandise imports was as crucial as it is puzzling. U.S. goods imports from China rose on month in May by $5.53 billion (or 17.79 percent). So they alone exceeded the $4.85 billion sequential increase in the overall trade deficit and the $4.24 billion rise in the goods deficit.

Even weirder – goods imports from China were up in May while overall imports and global goods imports were down (by 0.88 percent and by 0.76 percent, respectively).

Despite the widening of the merchandise trade gap with China, U.S. goods exports to the People’s Republic improved on month in May – by $1.04 billion, to $9.64 billion. That’s not terribly surprising, since all indications are that China’s economy began recovering sooner than America’s from its own CCP Virus-induced shutdown. In fact, that monthly merchandise export total is the highest since last November’s $10.10 billion – meaning that those U.S. sales are back in their range for the whole of last year, before the virus broke out in China.

But was the U.S. economy rebounding strongly enough in May to explain easily a resumption of buying from China that also brought goods imports back to their highest level since November, and well inside their range, too, for all of last year? That’s hard to accept, if only because overall U.S. goods imports remain significantly depressed from last year’s levels, and because of those Trump tariffs. Such bewilderment seems justified even given that in recent years, May has been a month during which merchandise imports from China have risen strongly. After all, this wasn’t a normal May.

It’s true that on a year-to-date basis through May, U.S. goods imports from China in 2020 are down 15.90 percent – more than the 12.60 percent drop for goods imports total (but not that much more). The difference is somewhat greater with the 10.35 percent decrease in January-May total U.S. non-oil goods imports – which are a better global comparison with China goods imports, since China doesn’t sell oil to the United States.

It’s also true that the United States’ merchandise deficit with China through May of this year has shrunk much faster (24.58 percent) than its overall global goods deficit (7.78 percent) and much, much faster than its global non-oil goods deficit (2.34 percent). But it’s true as well that a non-trivial amount of this progress has reversed itself this month (as well as in April).

And that’s why I’ll get you the detailed answer to the “what are these China imports” question ASAP.

(What’s Left of) Our Economy: Great New Developments on the U.S.-China Decoupling Front

Tags

CCP Virus, Census Bureau, China, coronavirus, COVID 19, decoupling, FDI, foreign direct investment, GDP, goods trade, gross domestic product, National Committee on U.S.-China Relations, Rhodium Group, supply chain, tariffs, Trade, Trump, venture capital, Wuhan virus, {What's Left of) Our Economy

Amid the flood of terrible news that’s been engulfing the U.S. economy because of the CCP Virus and its shutdown effects, there’s a decidedly positive development to report: Major evidence has just come in showing that the decoupling of the U.S. economy from China’s keeps proceeding. And, even better, the data make clear that the United States is amply capable of prospering without extensive ties with (and resulting vulnerabilities to) the increasingly hostile and dangerous regime in Beijing.

The latest evidence for such conclusions about the so-called decoupling process comes from a study just jointly released by a research firm called the Rhodium Group and a pillar of the Offshoring Lobby called the National Committee on U.S.-China Relations. The real work was done by the folks at Rhodium, and the big takeaways are:

>that the value of Chinese “foreign direct investment” (FDI) in the United States (i.e., Chinese takeovers or acquisition of stakes in existing non-financial assets in the United States, and creation of new non-financial assets) fell slightly on year last year to its lowest annual level ($4.78 billion) since 2010, and is now nearly 90 percent below its peak annual level of $46.49 billion in 2016;

>that the value of Chinese “venture capital” investment (a strange term for originating in the state-controlled Chinese economy) going into the United States fell from its all-time high of $4.67 billion in 2018 to $2.57 billion last year;

>that the value of U.S. FDI made into the Chinese economy edged up sequentially last year, from $12.89 billion to $14.13 billion, but still remains well below its peak of $20.94 billion in 2008;

>and that the value of U.S. venture capital investment going into China plummeted from its all-time high of $19.57 billion in 2018 to $4.98 billion in last year.

Even if you’re not concerned about greater integration with a country that’s threatened cut off vital medical supplies to the United States during the current pandemic, or about the national security threat posed by Chinese access to defense- or surveillance- or hacking-related tech, this is great news for anyone valuing the benefits of free markets. For any participation by China’s state-controlled system in the U.S. economy can only distort the workings of free markets, and in particular, force U.S. businesses (which until the CCP Virus invaded needed to rely on private sources for their capital) to compete with Chinese rivals (which can rely on the Chinese treasury).

Rhodium’s research also found that Chinese investment flows into the United States plunged even further during the first quarter of this year (the first pandemic quarter) while U.S. flows into China remained pretty stable. But the pre-CCP Virus results are undoubtedly more revealing of the underlying longer-term trends.

Decoupling is proceeding even faster on the trade front. Last week’s monthly U.S. trade report from the Census Bureau (for March) showed that the two-way value of U.S.-China trade in goods (the sum of imports and exports) sank by 42.49 percent between the first quarter of 2019 and the first quarter of 2020. That’s the lowest quarterly level since the $72.16 billion level recorded for the first quarter of 2006.

More revealing, though: At that point, two-way goods trade represented 0.53 percent of the total U.S. economy. In the first quarter of 2020, the proportion was down to 0.35 percent.

Of course, the first quarter 2020 results have been distorted by the CCP Virus’ effects (and greater distortion surely lies ahead). More specifically, gross domestic product (GDP) decreased from the fourth quarter of last year to the first quarter of this year, and it grew a measly 2.10 percent before adjusting for inflation over the fourth quarter of 2019. (This and the following growth figures are different, and higher, than the growth figures featured in the most widely tracked GDP figures, which are adjusted for price changes. I’m using the pre-inflation GDP figures here because inflation-adjusted country-specific trade figures aren’t available.)

For more “normal” data, let’s check out the figures for the year preceding the fourth quarter of 2019. During that timespan, the value of two-way U.S.-China goods trade dropped by 19.48 percent – from $171.57 billion to $138.15 billion. But pre-inflation growth hit a solid 3.98 percent.

Slightly shifting the time periods examined produces the same pattern. Between the first quarter of 2018 and the first quarter of 2019, the value of two-way U.S.-China goods trade nosedived by 46.40 percent. In other words, it was cut nearly in half. Yet current dollar growth during that period hit 4.64 percent.

At this point, it’s necessary to point out that this big 2018-19 decline in the value of two-way goods trade came right on the heels of a huge 77.58 percent increase between 2017 and 2018. But this rise stemmed mainly from the major adjustments made by businesses on both sides of the Pacific – especially what’s called U.S. tariff “front-running” – to deal with President Trump’s steadily escalating increases in tariffs on imports from China.

The justification for confidence that, but for the virus’ impact, the New Normal in U.S.-China trade would be reflecting more decoupling comes from examining the trends before and after President Trump’s January, 2017 inauguration. From the time Mr. Trump entered office through the end of last year, the economy grew by a total of 13.23 percent. But the value of two-way bilateral goods trade became 0.32 percent higher. In other words, for all intents and purposes, it didn’t grow at all.

That marks a major turnaround from the eight years under former President Obama, when the only first-quarter-to-first-quarter shrinkage in two-way trade (7.35 percent, between 2015 and 2016) was accompanied by weak 2.45 percent GDP growth. Moreover the only Obama first-quarter-to-first-quarter period when strong GDP growth (5.14 percent) was accompanied by only relatively modest growth in two-way bilateral trade (5.28 percent) came between 2014 and 2015. For the rest of his term in office, the growth of two-way U.S.-China goods trade significantly topped the growth of the economy, before taking inflation into account.

One of the most important concepts in free market-oriented economics is that of trade-offs, often expressed with the phrase, “There’s no such thing as a free lunch.”  Decoupling America’s economy from China’s will no doubt entail further disruption and costs related to the inevitable inefficiencies of supply chain rejiggering.  But the U.S.’ ability to grow strongly even as its economic engagement with China shrivels adds to the evidence that this lunch, if not exactly free, is a terrific value.