(What’s Left of) Our Economy: Is The Wall Street Journal Now Getting Woke on China Trade?

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allies, China, decoupling, dual-use technologies, health security, high tech goods, Huawei, investment, manufacturing, national security, technology, The Wall Street Journal, Trade, {What's Left of) Our Economy

Hell has frozen over! Death and taxes are no longer certain! Water is flowing uphill!

Those are just some of my calmer reactions upon learning that The Wall Street Journal editorial board has just endorsed the idea of a “partial decoupling” of America’s economy from China‘s.

Given today’s national mood, and the marked turn it’s taken against various domestic and international outrages committed by China, this may not sound surprising – especially if you (unlike me) haven’t immersed yourself in the trade policy wars Americans have waged against each in recent decades. But in a Mainstream Media long world filled with staunch supporters of the kinds of approaches to foreign trade and international commerce generally pursued by pre-Trump U.S. Presidents, the Journal‘s editorial writers have been far and away the staunchest. Indeed, their arguments usually read like they’ve been taken straight out of standard economic textbooks, without even paying lip service to real world complications.

Not that the Journal ever championed unfettered trade and commerce in war-time. (This exception was formally identified by the so-called Father of Capitalism, Adam Smith .) And not that it ever supported selling, say, weapons to the Soviet Union during the Cold War, or encouraging investment in North Vietnam during the 1960s and early 1970s.

But the editorial doesn’t describe today’s world in those terms. Instead, it notes that  “partial decoupling may be necessary to prevent China from accumulating more leverage to bully the free world.” and that “U.S. and allied dependence on Chinese technology in a crisis….could allow the Chinese Communist Party to disrupt or shut down parts of foreign economies—or use the threat as political leverage.”

And the Journal‘s editorial board is right. Those threats are more than serious enough to justify departures from conventional free trade and broader global economic policies – which understandably prize economic efficiency and low prices and individual economic freedoms during peacetime, but which have struggled to deal with those all too commonplace gray periods between tranquility and all-out conflict.

Yet however satisfying this apparent U-turn will be to the Journal‘s longtime trade antagonists (and take it from me – it’s really satisfying), for the sake of intellectual honesty, and of U.S. national interests, its editorial board will need to go much further. And so will other influential voices who are acting newly woke about the China threat, but who may mainly be looking for safe harbors during what they hope is merely a passing storm. Several reasons stand out, and all stem from the critical reality that no industry exists in isolation from other areas of the domestic economy – let alone other industries.

So to all the ostensible pragmatists who, for example have recognized – at least rhetorically – that national security needs to come before free trade and commerce, it’s high time to recognize the implications of a development you’ve long claimed to understand: that many products crucial for national defense also have major and even predominantly civilian functions, and that for such such dual-use goods and technologies (and not only semiconductors, but high-value manufactures of all kinds) strong domestic manufacturing bases are essential.

Moreover, maintaining strong domestic manufacturing bases requires maintaining robust production complexes for all the key parts and components of the final products.

These imperatives also apply to critical healthcare goods. For example, it doesn’t do much good to set as a goal making massive numbers of the most effective facemasks in America without also ensuring adequate domestic supplies of the raw materials and the machinery needed to make them. And currently, the global production centers are in China. Similarly, what’s the point of resolving to restore national self-sufficiency in ventilators when the nation remains woefully short of the circuit boards, sensors, computer chips, tubes, and numerous other parts they’re made of?

In addition, as pointed out repeatedly on RealityChek, the secure supply problem goes way beyond China. During the CCP Virus period, literally dozens of countries, including long-term treaty allies, have embargoed or curbed exports of healthcare equipment of all types. That is, as with war, there are few free traders during a pandemic.

The lessons of dealing with both China and the CCP Virus should be screamingly obvious: In their own ways, they both represent systemic problems, and therefore require systemic, not entity-by-entity or country-by-country, responses. Acknowledging these lessons will be the test of whether the Journal‘s editorial writers and others of their ilk actually are ready to play useful roles in developing realistic U.S. trade policies, or whether they’re simply posturing.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(What’s Left of) Our Economy: A Banner Month and Year for Trade (Deficits)

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

This morning’s U.S. trade figures revealed numerous records and multi-year highs set for the month of December and full-year 2017, but few represented good news. The monthly overall U.S. trade deficit hit its highest level ($53.12 billion) since October, 2008 ($70.14 billion) – just as the Lehman Brothers bankruptcy plunged financial markets and the entire economy into a tailspin. On an annual basis, the combined goods and services trade shortfall was the highest ($566.03 billion) since 2008’s $708.73 billion. And its yearly increase (12.13 percent) was the greatest since 2010’s 28.89 percent. New annual records were also set for total monthly imports ($256.47 billion) and annual imports ($2.895 trillion), as well as for monthly exports ($203.35 billion). But annual exports ($2.329 trillion) fell short of 2014’s record $2.376 trillion.

America’s manufacturing trade deficit fell for the second straight month in December, to $78.24 billion. But that performance was enough to send the annual total into record territory ($927.48 billion). The U.S. goods deficit with China in December took its biggest monthly tumble (13.05 percent) since February’s 26.64 percent. The December total ($30.81 billion) also was the lowest since May’s $31.61 billion, and resulted largely from an all-time high for U.S. goods exports ($13.67 billion). Nonetheless, the $375.22 billion annual merchandise shortfall with China set a new record as both goods exports to and imports from China hit new records of $505.60 billion and $130.37 billion, respectively.

In addition, as President Trump continued to try renegotiating the North American Free Trade Agreement (NAFTA), the American goods deficit with Mexico increased in 2017 to $71.06 billion – its highest level since 2007’s $74.80 billion.

Another all-time high was set by the U.S. deficit in high tech goods. At $110.38 billion, it featured both record exports ($353.87 billion) but also record imports ($464.26 billion). Monthly high tech exports also entered record monthly territory in December ($33.53 billion).

The new trade figures also showed that monthly trade deficit surge helped boost the growth drag of the “Made in Washington” trade deficit to 18.47 percent during the current economic recovery. This is the shortfall in trade flows heavily influenced by U.S. trade policy, and its increase since the last recession ended has sliced $538.89 billion after inflation from the cumulative expansion of real gross domestic product.

Here are selected highlights of the latest monthly (December) and full-year 2017 trade balance figures released this morning by the Census Bureau:

>The combined U.S. goods and services trade deficit rose on month in December by 5.32 percent to hit $53.12 billion – its highest level since October, 2008 ($70.14 billion), when the bankruptcy of Wall Street investment giant Lehman Brothers sparked a dizzying tailspin in financial markets and the real economy.

>December’s shortfall helped push the annual U.S. trade deficit for 2017 to its highest yearly total ($566.03 billion) since 2008 ($708.73 billion). Moreover, the overall trade deficit’s annual increase of 12.13 percent represented its fastest growth since 2010 (28.89 percent).

>The new trade figures showed that monthly imports in December reached an all-time high of $256.47 billion – their second monthly record in a row and a 2.49 percent increase from November’s $250.24 billion.

>Last year’s total imports set a new annual record as well. At $2.895 trillion, they were 6.73 percent higher than 2016’s total and 1.02 percent greater than the previous record of $2.866 trillion set in 2014.

>December monthly overall exports were a new record, too – rising 1.77 percent sequentially to $203.35 billion.

>But 2017’s annual combined goods and services exports of $2.329 trillion, though 5.49 percent higher than the 2016 figure, were lower than the annual record of $2.376 trillion, set in 2014.

>The huge, chronic American trade deficit in manufacturing fell sequentially in December for the second straight month, with its $78.24 billion level representing a 9.23 percent improvement.

>Manufacturing exports advanced on month by 2.16 percent, from $92.88 billion to $94.89 billion, while imports sank by 3.32 percent, from $179.08 billion to $173.13 billion.

>On an annual basis, however, the manufacturing deficit set its latest record high by climbing 7.46 percent percent to $927.48 billion.

>Between 2016 and 2016, manufacturing exports advanced by 4.34 percent, but imports swelled by 5.75 percent.

>The behavior of the manufacturing-heavy American merchandise trade deficit with China mirrored that of the overall manufacturing shortfall.

>December’s $30.81 billion U.S. goods trade deficit with China was 13.05 percent lower than November’s total, a sequential decrease that was the fastest since February’s 26.64 percent. The December figure was also the lowest since May’s $31.61 billion.

>Moreover, December’s U.S. goods exports of $13.67 billion were a record – eclipsing the previous peak of $13.15 billion, set in October, 2013, by 4.20 percent.

>Nonetheless, the full-year 2017 U.S. merchandise trade shortfall with China widened by 8.13 percent on year to a new record of $375.23 billion. That figure topped the old (2015) all-time high of $367.26 billion by 2.17 percent.

>U.S. goods exports to the strongly growing Chinese economy grew by 12.75 percent in 2017 to $130.37 billion – another record, and 5.43 percent better than 2014’s former all-time best of $123.66 billion.

>U.S. goods imports from China, however, hit a new record, too. At $505.60 billion, they were up 9.29 percent on year, and topped the previous (2015) record by 4.64 percent.

>The new trade figures could reenforce President Trump’s determination to renegotiate the North American Free Trade Agreement (NAFTA).

>As with China, the U.S. merchandise trade deficit with Mexico fell on month in December to $5.37 billion. That level was the lowest since July’s $4.92 billion, and a sequential drop of 10.14 percent from November’s levels.

>But year-on-year, this goods shortfall increased by 10.41 percent, to $71.06 billion – the highest level since 2007’s $74.80 billion.

>The goods trade deficit with Canada more than doubled on month, to $2.20 billion, and the annual total rebounded by 60.46 percent, to $17.58 billion after plunging by 28.73 percent on year in 2016, to $10.96 billion.

>The 2016 Canada goods deficit is the highest since 2014, but it’s less than half the level of that year’s $36.47 billion.

>America’s trade in high tech goods roughly duplicated this pattern, too. The monthly deficit plummeted by 36.65 percent from the record $15.63 billion in November to $10.06 billion. That monthly drop was the biggest since February’s 46.39 percent nosedive.

>This improvement stemmed from a 10.84 percent increase in exports to $33.53 billion – a new monthly record – and a five percent drop in imports from November’s record $45.88 billion to $43.59 billion.

>On an annual basis, though, the high tech goods deficit surged to a new all-time high of $110.38 billion in 2017 – up 31.93 percent on year and 11.82 percent higher than the previous record of $98.72 billion, set in 2011. The 2017 annual jump in the deficit was also the biggest since 2010’s 44.07 percent, when the current U.S. recovery was in its early stages.

>U.S. advanced technology exports rose on year in 2017 by 2.42 percent, to a record $353.87 billion, while imports increased by 8.17 percent to their own record – $464.26 billion.

>According to the new trade figures, which make fourth quarter, 2017 calculations possible, the growth drag on the U.S. economic recovery of the “Made in Washington” trade deficit worsened significantly from its third quarter levels.

>This shortfall is comprised of trade flows influenced heavily by American trade agreements and similar policies – i.e., trade in non-oil goods, where these measures have had much greater effects on imports and exports than they have in services trade and energy trade.

>As of the third quarter of 2017, the increase in this deficit since the current recovery began in mid-2009 had cut cumulative American inflation-adjusted growth by 16.36 percent, or $459.9 billion.

>The new trade figures peg this lost growth at 18.47 percent of the recovery total, or $538.89 billion.

(What’s Left of) Our Economy: New Figures Show a Likely Post-Recession U.S. Trade Deficit High in Trump’s Year One

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Census Bureau, China, exports, gross domestic product, high tech goods, imports, Made in Washington trade deficit, manufacturing, non-oil goods deficit, oil, recovery, Trade, trade deficit, Trump, {What's Left of) Our Economy

In November, the highest combined U.S. goods and services trade deficit ($50.50 billion) since January, 2012 ($50.98 billion) threatened to push the annual shortfall to its highest level since 2008 ($708.73 billion) – as the Great Recession got underway.

The 3.24 percent sequential increase in the overall trade deficit resulted in part from a 46.11 percent monthly jump in the oil gap and from the second straight all-time monthly figure for total imports ($250.72 billion versus October’s $244.70 billion); record monthly goods imports ($205.46 billion); a second straight record monthly high-tech goods deficit ($15.53 billion versus October’s $13.82 billion) which propelled the total to a new annual record ($100.33 billion) after only eleven months; and all-time highs in the monthly non-oil goods deficit in inflation-adjusted and pre-inflation terms ($66.66 billion versus $65.43 billion), and ($65.22 billion versus $64.99 billion). The former will probably help turn trade into a net U.S. growth killer in the fourth quarter of this year, and since both are largely driven by U.S. trade policy, their growth signals major continuing challenges for the Trump administration in this field.

The immense U.S. manufacturing trade deficit retreated on month from its October all-time high ($88.98 b). But at $86.20 billion, it still represented the second highest monthly total on record, and on an annual basis, this gap, too, seems likely to set its latest annual record. Not surprisingly, given its manufacturing-heavy nature, the enormous U.S. merchandise trade deficit with China looks headed to a new annual record as well.

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

>November’s combined U.S. goods and services trade deficit of ($50.50 billion), the highest such level since January, 2012’s $50.98 billion, greatly boosted the odds that the overall trade shortfall in 2017 will be the worst since 2008’s $708.73 billion – which was recorded as the Great Recession was spreading through the American economy.

>As of November, the total trade deficit of $513.58 billion was running 11.60 percent ahead of last year’s rate and is already higher than the full year total of $504.79 billion. The current post-2008 high for the overall trade shortfall is only $548.63 billion, reached in 2011.

>The November combined goods and services trade deficit total represented a 3.24 percent increase over the upwardly revised October figure of $48.91 billion.

>The monthly trade deficit has now risen sequentially three straight times after falling for four straight times.

>One big driver of the trade gap’s monthly rise was a 46.11 percent sequential jump in the U.S. oil trade deficit. The $1.51 billion increase, from just under $3.27 billion to just over $4.77 billion, accounted for nearly 95 percent of the trade shortfall’s monthly deterioration.

>But also contributing were several all-time deficit and import records in various components of overall U.S. trade flows.

>U.S. overall imports set their second straight monthly record in November, with the $250.72 billion topping October’s $244.7 billion by 2.46 percent.

>Monthly goods imports of $205.46 billion amounted to a record, too – surpassing the previous all-time high of $202.37 billion, set in April, 2014, by 1.53 percent.

>The record November deficit in high tech goods of $15.53 billion was a second straight all-time high as well. It eclipsed October’s $13.82 billion by 12.37 percent.

>In fact, this performance has already propelled this shortfall to a new annual record of $100.33 billion – 1.63 percent higher after 11 months than 2011’s 12-month total of $98.72 billion.

>New monthly deficit records were also set in the non-oil goods deficits on both an inflation-adjusted and pre-inflation-adjusted basis. Both reflect significantly reflect on the performance of U.S. trade policy, since they’re comprised of trade flows heavily influenced by trade agreements and similar decisions. And the continued deterioration of these “Made in Washington” trade deficits indicates that President Trump still faces major challenges in transforming America’s approach to the global economy.

>In addition, the inflation-adjusted figure is part of the calculation of the most closely-followed measure of America’s gross domestic product and its changes, and the November results suggest that trade will return to its typical role as an American economic growth killer in the fourth quarter of this year.

>In current dollars, the non-oil goods deficit rose sequentially to its second straight monthly record, with the November $65.22 billion figure standing 0.35 percent higher than October’s upwardly revised $64.99 billion.

>The real non-oil goods deficit also achieved its second straight monthly record in November, as it also increased by 0.35 percent on month to $65.66 billion. This trade shortfall is running 5.65 percent ahead of last year’s pace.

>As a result, the trade drag on the current economic recovery is likely to increase in the fourth quarter from the final third quarter figure of 16.36 percent – representing $459.9 billion worth of after-inflation growth lost since the recession officially ended in mid-2009.

>Interestingly, these developments were so adverse that they more than offset the effects of several record export totals.

>Specifically, a 2.27 percent sequential rise in total exports in November brought them to a new monthly record of $200.22 billion – fractionally higher than the previous all-time best of $200.14 billion from October, 2014.

>Moreover, the services sector set its second straight monthly exports record, with the November figure of $65.66 billion inching past October’s $65.60 billion.

>In addition, goods exports in November rose to their best level ($134.57 billion) since November, 2014’s $135.75 billion.

>The huge and longstanding U.S. manufacturing trade deficit retreated in November from the all-time record it set in October ($88.98 billion). But at $86.20 billion, it still represented the second highest total on record.

>Manufacturing exports fell 1.02 percent on month in November, to $92.88 billion. Manufacturing imports dropped nearly twice as fast – by 2.05 percent, to $179.08 billion.

>Year-to-date, the manufacturing trade deficit is running 6.85 percent seven percent ahead of 2016’s record total of $863.07 billion – which was an all-time high.

>On year between January and November, manufacturing exports have increased by 4.19 percent, and imports have risen by 5.45 percent.

>The massive, longstanding U.S. merchandise trade deficit with China rose by only 0.57 percent month-to-month in November. But the $35.43 billion figure did represent the third highest monthly total on record.

>U.S. goods imports from China in November fell by a mere 0.10 percent from October’s all-time high of $48.20 billion to $48.15 billion.

>U.S. goods exports to China’s fast-growing economy decreased much faster – by 1.93 percent, to $12.72 billion.

>Year-to-date, the China goods deficit is running 7.86 percent ahead of last year’s total – and 1.50 percent ahead of the 2015 rate, which eventually set the current annual record.

(What’s Left of) Our Economy: New Record Shortfalls in Manufacturing & High Tech Goods Key U.S. Trade Deficit Surge

Tags

Census Bureau, China, exports, high tech goods, imports, Made in Washington trade deficit, manufacturing, Mexico, non-oil goods trade deficit, services trade, Trade, trade deficit, {What's Left of) Our Economy

The combined U.S. goods and services trade deficit jumped 8.56 percent on month in October, to $48.73 billion, on new record trade shortfalls in key sectors of the economy, and in trade flows heavily influenced by U.S. trade policy. The monthly manufacturing trade deficit soared 11.35 percent sequentially to $88.98 billion – an all-time high that topped the previous record by (set in August) by 8.35 percent. In high tech goods, the October trade gap rose on-month by 33.67 percent, to a record $13.82 billion, largely on unprecedented ($43.39 billion) monthly imports.

The real non-oil goods deficit – which can be considered “Made in Washington” because it entails commerce covered by free trade deals and other policy decisions, and which will weigh on the most closely followed GDP figures – hit $65.21 billion in October, 8.07 percent higher than September’s figure, and 3.85 percent greater than the previous (March, 2015) record of $62.80 billion. The non-oil goods gap also hit a record on a pre-inflation basis in October, as it rose 7.96 percent to $64.87 billion. That total topped the previous record ($61.74 billion, also set in March, 2015) by 5.07 percent.

October’s data also revealed new monthly all-time highs for services exports and imports – and each for the second straight months. The former rose 0.46 percent sequentially, from a downwardly adjusted $65.29 billion to $65.59 billion; and the latter rose by 0.69 percent, from an upwardly adjusted $44.93 billion to $45.24 billion.

Although the October China goods deficit was “only” the third highest monthly total on record ($35.23 billion), October U.S. goods imports from the PRC set new a monthly high of $48.20 billion. Ditto for merchandise imports from Mexico ($28.72 billion). The October trade report was also notable for revising the September total deficit sharply (3.20 percent) upward, from $43.50 billion to $44.89 billion. Most of this upgrade came in the services trade, where the September surplus estimate was pushed 7.03 percent higher.

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

>A series of new record trade gaps in key parts of the economy (notably manufacturing and high tech goods), and in trade flows strongly shaped by U.S. trade policy (notably, non-oil goods) helped widen the total U.S. goods and services trade deficit by 8.56 percent on month in October. The $48.73 billion figure was the highest such total since January’s $48.78 billion.

>The new manufacturing trade deficit set in October ($88.98 billion), eclipsed the previous record of $82.15 billion (set in August), by 8.31 percent. Sequentially, the manufacturing trade shortfall rose 11.35 percent.

>October manufacturing exports of $93.84 billion were 3.22 percent higher than September’s $90.92 billion total. But the much greater amount of imports rose more than twice as fast – 7.03 percent – and hit $182.83 billion.

>Year-to-date, the manufacturing trade deficit is running seven percent ahead of last year’s record total – which was an all-time high.

>On this basis, manufacturing exports have increased by 3.79 percent, and imports have risen by 5.24 percent.

>In high tech goods trade, the new October record deficit of $13.82 billion bested the old (November, 2016) mark of of $13.79 billion by just 0.21 percent.

>A 6.87 percent monthly rise in high tech goods exports, to a new record $43.39 billion, was largely responsible.

>This import jump also helped the trade deficit in this volatile category surge by 33.42 percent sequentially.

>High tech goods exports declined on month in October by 2.29 percent, to $29.57 billion.

>The high tech goods deficit is running 28.25 percent ahead of last year’s pace so far this year, and seems headed for a new annual record, too.

>America’s non-oil goods trade balances can be considered “Made in Washington,” because they exclude commerce in services and energy (where trade liberalization has made relatively few advances), and therefore include products whose trade performance is strongly affected by trade agreements and related policy decisions.

>The real non-oil goods trade balance is especially important, since it’s a component of the most closely followed (inflation-adjusted) gross domestic product (GDP) figures, and since its changes reveal whether trade policies are contributing to or subtracting from growth.

>So it can’t be good news that this chronic deficit hit an all-time high in October of $65.21 billion – 3.85 percent greater than the previous (March, 2015) record of $62.80 billion, and 8.07 percent higher than September’s $60.34 billion.

>As a result, unless the November and/or December figures decrease enough, the trade drag on the current economic recovery will rebound in the final quarter of 2017 after falling to 16.32 percent ($459.2 billion in lost real growth) according to the latest third quarter figures.

>The pre-inflation non-oil goods deficit hit a new record as well in October. The $64.87 billion total represented a 7.96 percent rise over September’s total, and a 5.07 percent increase over the previous record ($61.74 billion, also set in March, 2015).

>Other October records were set in monthly services exports and imports – and each represented a second-straight all-time high.

>Services exports in October rose by 0.46 percent on month, from a downwardly adjusted $65.29 billion to $65.59 billion; while imports increased by 0.69 percent, from an upwardly adjusted $44.93 billion to $45.24 billion.

>The massive, longstanding U.S. merchandise trade deficit with China did not set a record in October – although the $35.23 billion total was the third highest on record, and represented a 1.71 percent increase over September’s 6.74 percent figure.

>Yet U.S. goods imports from China did reach an all-time highs in October, rising 6.06 percent sequentially, to $48.20 billion – 5.19 percent greater than the previous $45.82 billion mark set in August.

>In October, America’s merchandise exports to the PRC did stay well below their monthly records, but still shot up 20.03 percent sequentially, to $12.97 billion.

>Year-to-date, the China goods deficit is running seven percent ahead of last year’s total – and 0.30 percent ahead of the January-October, 2015 rate, which eventually set the current annual record.

>U.S. merchandise imports from Mexico rose to an all-time high in October, too, with the $28.72 billion figure coming in 11.37 percent higher than September’s and 2.38 percent higher than the previous $28.05 billion record set in March.

>The U.S.-Mexico goods deficit – a prime target of President Trump’s trade policies – rose by 15.91 percent sequentially in October, as America’s goods exports rose on month by 10.08 percent to reach $21.11 billion. That represented their second best total ever after October, 2014’s $21.35 billion.

>Another prominent feature of the October trade report was a major (3.20 percent) upward revision in the September deficit – which is now judged to have been $44.89 billion instead of $43.50 billion. The new estimates were largely fueled by a 7.03 percent downgrading of the September services trade surplus, from $21.89 billion to $20.35 billion.

>Overall, the combined U.S. goods and services trade deficit is running 11.86 percent ahead of last year’s total, with total exports 5.32 percent higher and a 6.52 percent greater imports level.

(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.

(What’s Left of) Our Economy: Slight March Trade Deficit Dip Conceals Numerous Milestones, Major Asia Deterioration

Tags

Asia, Canada, Census Bureau, China, European Union, exports, free trade agreements, high tech goods, imports, Japan, KORUS, manufacturing, Mexico, NAFTA, North American Free Trade Agreement, Pacific Rim, recovery, services, South Korea, Trade, trade deficit, {What's Left of) Our Economy

Note:  So many new records and multi-year highs were revealed by the March trade figures released this morning by the Census Bureau that I’m posting this abbreviated, just calculated, write-up — containing all the main highlights — rather than the usual lengthier, more comprehensive version.

America’s goods and services trade deficit slipped by 0.12 percent on month in March, to $43.71 billion, but the decline was more than offset by a noteworthy 0.47 percent upward revision to the originally reported February figure – to $43.76 billion. This modest movement, moreover, masked major deterioration in America’s trade balances with Pacific Rim countries, many of whose surpluses with the United States had been depressed by winter or spring holidays. 

Whereas in February, the American goods deficit with that region plunged sequentially by 30.76 percent, it rebounded in March by 25.39 percent, to $33.55 billion – the biggest such jump since last March 2015’s 52.63 percent. The greatest (15.53 percent) monthly merchandise import increase since then was largely responsible. Although the China goods deficit remained high – mainly because U.S. merchandise exports in March fell for the fifth straight month – the biggest trade swings were recorded with Japan and South Korea. Significantly, March marked the fifth anniversary of the implementation of the bilateral U.S.-Korea free trade agreement (KORUS) 

The March merchandise deficit with Japan soared by nearly 55 percent, to its highest level ($7.42 billion) since April, 2008 ($7.61 billion). And American goods imports from Japan rose by 32.12 percent to $13.04 billion – their highest total since March, 2007 ($13.47 billion). 

U.S. merchandise exports to South Korea hit a new monthly all-time high in March ($4.36 billion), imports rose to their second highest level ever ($6.61 billion), and the large sequential gains left the goods deficit at $2.25 billion. That was 73.50 percent higher than a February figure that itself had fallen by nearly 50 percent.  

Since KORUS’ implementation, in March, 2012, the U.S. merchandise deficit with South Korea has more than quadrupled (from $561.4 million) on a monthly basis.  By that same measure, U.S. goods exports to South Korea are up by 3.99 percent, and goods imports are 38.08 percent higher. 

The huge and chronic U.S. goods deficit with China rose by 7.03 percent sequentially in March, to $24.58 billion, but remained well below record levels. Nonetheless, American merchandise exports to China’s still strongly growing economy fell for the fifth straight month, to $9.63 billion. That was their lowest level since last September ($9.56 billion). 

Asia events also clearly influenced the big on month rebounds in the March trade deficits for manufacturing (up 15.23 percent, to $69.76 billion, after dropping by 19.88 percent) and high tech goods (up 33.87 percent, to $6.07 billion, after plummeting by 46.39 percent).

New records and multi-year highs were set in U.S. trade on other fronts, too. American goods exports to the European Union hit $25.69 billion – a new all-time best. Goods imports from NAFTA partner, Mexico, however, hit a new record as well ($21.02 billion), and helped boost the bilateral merchandise to its highest level ($7.03 billion) since November, 2007 ($7.23 billion) – just before the Great Recession officially began. The United States fared better with its other NAFTA partner, Canada. Its merchandise deficit sank by 35.49 percent, to $1.37 billion, as exports of $24.92 billion represented the best such total since March, 2015 ($25.50 billion), and imports of $26.29 billion represented their highest level since June, 2015 ($27.34 billion).

U.S. global services exports rose in March to a new record high as well ($64.70 billion), and helped push the surplus to its best level ($21.80 billion) since June, 2015 ($22.41 billion). As for overall goods and services exports and imports, they both fell sequentially in March (by 1.02 percent and 0.73 percent, respectively). 

The trade drag on the historically feeble American economic recovery declined as well, from 17.55 percent in the fourth quarter of last year to 17.44 percent of during the first quarter of this year, but still slowed the economy’s cumulative expansion by a staggering $433.76 billion after inflation.

(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: A Comeback for the U.S. Trade Deficit – & Most (but not all!) of the Usual Suspects

Tags

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.