(What’s Left of) Our Economy: The New Official Data Seem to Portend Still Higher U.S. Trade Deficits

Tags

Advanced Technology Products, ATP, banking crisis, China, election 2024, exports, Federal Reserve, imports, inflation, Made in Washington trade deficit, manufacturing, monetary policy, non-oil goods trade, stimulus, Trade, Trade Deficits, {What's Left of) Our Economy

Yesterday’s official report on U.S. trade flows (for February) almost eerily resembled its January predecessor. Change generally was modest in the broadest categories of trade balances, exports, and imports tracked by the U.S. Census Bureau. But numerous developments in the narrower categories were more dramatic, including a new record (in services trade), and some monthly results that haven’t been seen since the peak of the CCP Virus in early spring, 2020.

And another key way in which the February data resemble January’s:  They appear to support the case that the U.S. trade deficit is on an upward path again – and this despite mounting signs that economic growth is slowing (which all else equal should reduce the shortfall).    

The services best came on the export side, with these overseas sales rising from an upwardly revised $80.31 billion to an all-time high of $81.97 billion. This total surpassed the old mark of $81.32 billion (set in December) by 0.81 percent. And the sequential rate of increase (2.08 percent) was the fastest since last April’s 3.31 percent jump.

More broadly, the total trade deficit rose in February for the third straight month. But the increase – from an upwardly revised $68.66 billion to $70.54 billion – was an unexceptional 2.46 percent. At the same time, the figure was the highest since last October’s $77.16 billion.

The trade gap in goods widened, too, by three percent, from an upwardly revised $90.27 billion to $92.98 billion. This total was also the biggest since October ($98.62 billion).

A much better performance was turned in by services trade. Its longstanding surplus was up 3.86 percent sequentially in February, from a downwardly revised $21.61 billion to $22.44 billion.

Combined goods and services exports retreated from January’s upgraded $258.01 billion (the best such result since September’s $259.14 billion) to $251.15 billion. The decline was the fifth in the last six months and its 2.66 percent pace was the fastest since the 20.20 percent nosedive back in April, 2020 – well into the deep depression triggered by the devastating first wave of the CCP Virus.

Goods exports sank in February, too – also for the fifth time in the last six months, from a downwardly revised $177.70 billion to $169.18 billion. And the 4.80 percent sequential tumble was also the worst since pandemic-dominated April, 2020 – when they plummeted by 25.25 percent.

Total U.S. imports dipped by 1.53 percent on month in February, from an upwardly revised $3.26.67 billion to $321.69 billion. The decrease was the first since last November and the biggest since that month’s 6.34 percent.

The same story held for goods imports, which slipped by 2.17 percent month-to-month in February, from an upwardly revised $267.97 billion to $262.15 billion. This decline was also the first and biggest since last November (when they plunged by 7.38 percent.

Services imports not only grew by 1.42 percent sequentially in February, by $58.70 billion to $59.33 billion. They also were up from a January level that was revised up by a hefty 1.37 percent. The February number was just shy of the record $59.55 billion set last September.

The non-oil goods deficit inched just 0.29 percent in February, from $91.85 billion to $92.13 billion. It’s always worth following both because

>as known by RealityChek regulars, it can be considered the Made in Washington trade deficit, since non-oil goods are the trade flows most heavily influenced by U.S. trade agreements and other trade policy decision; and

>because it’s the closest global proxy for U.S.-China goods trade. As a result, comparing trends in the two can indicate the effectiveness of the Trump-Biden China tariffs, which cover hundreds of billions of dollars worth of Chinese products aimed at the U.S. market.

So in this vein, it’s more than a little interesting that the chronic and enormous American goods shortfall with the People’s Republic plummeted by fully 24.28 percent on month in February, from $25.16 billion to $19.00 billion. This new level is the lowest since pandemic-y March, 2020’s $11.71 billion, and the monthly decrease the fastest since last November’s 26.23 percent.

In February, U.S. goods exports to China fell for the fourth straight month – by 11.26 percent, from $13.09 billion to $11.62 billion. And that total is the worst since last April’s $11.20 billion.

The February fall-off in U.S. goods imports from China was the first in three months. Moreover, the 19.95 percent drop, from $38.25 billion to $30.62 billion, was the biggest since the 31.48 percent recorded in February, 2020, which was the peak of China’s (and the world’s) first covid wave.

Another big – and encouraging – move was made by U.S. manufacturing. It’s also chronic and huge trade gap narrowed for the third time in the last four months, from $116.83 billion to $100.05 billion. The 14.36 percent sequential fall-off was the biggest since the 23.09 percent in that peak-China covid February, 2020, and the monthly total the smallest since February, 2021’s $89.29 billion.

Manufacturing exports were down by 4.36 percent, from $105.71 billion to $102.52 billion. That figure is the weakest since last February’s $94.55 billion.

The February manufacturing imports decrease was nearly twice as fast – 9.69 percent, from $219.36 billion to a $198.10 billion level that’s the lowest since April, 2021’s $198.06 billion.

Consistent with the China and especially manufacturing results, the trade deficit in advanced technology products (ATP) saw its fourth straight contraction in February, too – specifically by 0.73 percent, from $16.35 billion to $16.23 billion. That total is the lowest since last February’s $13.42 billion.

ATP exports retreated for the second straight month – by 9.20 percent, from $32.07 billion to $29.12 billion. The decrease was the biggest since November’s ten percent, and brought these foreign sales to their lowest level since last February’s $29.02 billion.

Another four-month decline streak was registered by ATP imports, which dropped from $48.42 billion to $45.35 billion. This total was also the lowest since last February’s $42.44 billion, indicating that ATP trade is partly shaped by seasonal influences.

The February bilateral trade figures for some major U.S. trade partners reminded again of how volatile these flows can be (partly because of small absolute numbers of course).

America’s goods trade surplus with the United Kingdom (UK), for example, cratered by 68.40 percent on month, from $2.74 billion to $870 million. This total was the worst (for the United States) since the UK ran a $140 million surplus last June. The percentage change was the biggest since then, too.

But this nosedive followed the U.S. surplus’ 80.47 percent increase to that January $2.74 billion total that was a new all-time best, eclipsing the old mark of $1.87 billion from immediately pre-pandemic-y February, 2020 by 47.40 percent.

The U.S. goods deficit with France, however, fell by 57.86 percent on month in February, from $1.17 billion to $490 million. This shortfall was the smallest since last September’s $470 million, and the decrease was the bigest since last May’s 66.09 percent.

The U.S. surplus with the Netherlands sank by 42.46 percent, from $3.20 billion to $1.84 billion. This figure was the lowest since January, 2022’s $1.79 billion and the biggest decrease since last November’s 42.86 percent.

The trade gap with Thailand was down 35.68 percent sequentially, from $3.74 billion to $2.40 billion. This February number is the lowest monthly level since February, 2021’s $2.23 billion, and the fall-off the greatest since the 40.60 percent in November, 2006 – when bilateral trade was much more meager.

Finally, the longstanding U.S. goods gap with India narrowed by 33.61 percent, from $4.99 to $3.31 billion. This total was the lowest only since December’s $2.41 billion. But the decline was the biggest since February, 2021’s 34.09 percent. And it followed a more than doubling (106.51 percent) of the shortfall in January that was the biggest since January, 2019’s 224.17 percent.

Just as the overall February U.S. trade results closely tracked those of January, the deficit outlook does, too. That’s largely because the developments pointing to more American import-attracting spending (like politicans’ temptation to stimulate the economy as a new presidential election approaches and what I’m increasingly convinced is a determination by the Federal Reserve to back off its recession-threatening inflation fight) look stronger than those signaling less of that spending (like an economic weakening that looks likelier principally because of the lagged effect of the monetary tightening already begun by the Fed, and because a credit crunch will likely emerge due to the recent banking jitters).

Add in ongoing and possibly greater weakening of the global economy – which will undermine U.S. exports – and it’s easy to see why higher U.S. trade deficits seem in the offing.

Advertisement

(What’s Left of) Our Economy: An Encouraging June Swoon for the U.S. Trade Deficit

Tags

China, energy, exports, GDP, goods trade, gross domestic product, imports, Made in Washington trade deficit, manufacturing, non-oil goods deficit, recession, services trade, supply chain, Trade, trade deficit, Ukraine War, Zero Covid, {What's Left of) Our Economy

This morning’s official data (for June) show that U.S. trade was firing on practically all cylinders that month. In addition, the shrinkage in the combined goods and services deficit to the lowest level ($79.61 billion) since last December ($78.87 billion) was clearly attributable not only or even mainly to developments holding the nation’s imports down – ranging from a slowing in American economic growth (and therefore in most consumption) to the wounds China is inflicting on its export-heavy economy due to its insanely over-the-top Zero Covid policy to separate renewed backups at U.S. ports.

Instead, it’s also happening because many exports are up (to record levels), and that’s especally impressive because the dollar is so strong (which places U.S.-origin goods and services at price disadvantages all over the world, including in their home market) and because global growth is getting so weak (which tends to dampen demand for America’s offerings). And P.S. – these rising exports encompassed more than just the U.S. natural gas and other fossil fuels in such demand due to the Ukraine war and related sanctions on Russia.

The June figures reported one important exception, though: a monthly surge in the goods trade deficit with China to its highest level since November, 2018.

The June sequential drop in the overall trade deficit of 6.23 percent, from May’s $84.91 billion, was the third straight monthly decrease – a streak that hasn’t been seen since the second half of 2019, when the shortfall dropped sequentially six consecutive times – between June and November. Even better, the May total trade gap was revised down by a healthy 0.75 percent.

The deficit in goods trade – which dominates U.S. trade flows – tumbled 4.74 percent on month from $104.43 billion to $99.48 billion, its lowest level since last November. It, too, decreased sequentially for the third straight month, the first such stretch since December, 2019 through February, 2020 – just before the CCP Virus’ arrival in force began roiling and distorting the entire U.S. economy.

Meanwhile, the longstanding surplus in trade in services – which has been hit particularly hard by pandemic-related lockdowns and more cautious consumer behavior – advanced by 1.76 percent, from May’s upwardly revised (by 0.58 percent) $19.53 billion to $19.87 billion.

Combined goods and services exports hit their fifth straight monthly high in June, rising 1.67 percent from May’s upwardly revised $256.52 billion to $260.80 billion.

Energy goods exports were indeed way up – with natural gas overseas sales jumping by 26.51 percent, fuel oil exports increasing by 8.66 percent, and miscellaneous petroleum products climbing by 3.97 percent.

But they were far from the only significant export winners. For example, machinery and equipment exports soared by 13.78 percent on month in June; of foods, feeds, and beverages exports improved by 5.81 percent; and high tech goods’ foreign sales gained 4.51 percent.

In fact, goods exports overall also reached unprecedented heights for a fifth straight month in June, rising 1.97 percent sequentially from $179.51 billion to $183.04 billion.

As for services, their foreign sales hit their third straight all-time high, growing 0.97 percent on month, from $77.01 billion to $77.76 billion.

Overall imports, as mentioned, inched down sequentially – by 0.30 percent – in June, from $341.43 billion to $340.41 billion.

Another small monthly June decrease was registered by goods imports, which sagged by 0.50 percent, from $283.94 billion to $282.52 billion.

Only services imports broke this pattern: They set their own fifth consecutive record, increasing by 0.70 percent, from $57.49 billion to $57.89 billion.

The news in manufacturing trade was good, too – but only in comparison to industry’s recent alarming performance. The sector’s chronic, mammoth trade deficit was down 1.92 percent on month in June, from $132.60 billion to $130.05 billion. But this most recent total was still the third highest ever, after March’s $142.22 billion and the May figure.

Manufacturing joined the list of June export winners, as foreign sales increased sequentially from $112.15 billion to a new record $114.78 billion.

Manufactures imports inched up by mere 0.04 percent on month in June, from $244.75 billion to $244.83 billion. But this number was the second worst on record, after March’s $256.18 billion.

All told, at the statistical midway point of the year, the manufacturing trade deficit is running 22.13 percent ($756.53 billion vs $619.42 billion) ahead of last year’s record total. As a result, it’s all but certain that the United States in 2022 will rack up its fifth straight $1 trillion-plus manufacturing trade gap.

Year-to-date manufacturing exports are up 16.26 percent – from $548 billion to $637.12 billion. But the much greater amount of manufacturing imports has risen even faster – by 19.38 percent, from $1.16742 trillion to $1.39365 trillion.

Until very recently in the pandemic period (and its possible aftermath), as noted here, domestic manufacturing output and employment have held up remarkably well despite U.S.-based industry’s ballooning trade gap. The reason, as I pointed out here, is that Americans’ demand for manufactured goods has grown so strongly that domestic producers have been able to boost output even as imports flooded in much faster.

But with domestic manufacturing output decreasing in inflation-adjusted terms in both May and June, it looks like an economy-wide U.S. slowdown is weakening this demand, and that U.S.-based industry is finally paying a price for the share of its home market that it’s been losing.

The June China trade front news was even worse than that for manufacturing. The U.S. goods deficit with the People’s Republic soared by 17.13 percent sequentially, from $31.54 billion to $36.95 billion. That level is the highest since November, 2018’s $37.69 billion, and the increase the biggest since the 20.45 percent recorded in May, 2020 – when China and the United States were making recoveries from the first CCP Virus wave.

U.S. goods exports to China slumped by 5.22 percent, from $12.32 billion to $11.68 billion, while imports popped by 10.85 percent, from $43.86 billion to $48.63 billion – the highest total since last December’s $49.53 billion.

At least as important, this bilateral goods trade deficit is now up 27.51 percent on a year-to-date basis, as opposed to the 24.34 percent increase over the same period for its closest global proxy – the U.S. non-oil goods deficit.

For most of the time since the imposition of the first China tariffs imposed by former President Donald Trump in early 2018, this “Made in Washington” trade deficit (so named because by omitting services and oil trade, it tracks the U.S. trade flows most heavily influenced by U.S. trade policy) has been rising more slowly than the China goods deficit. Yet the gap, as noted in last month’s trade report, has been narrowing lately, and the June figures signal that it might be gone for the time being.

In general, though, the June trade report was a pleasant surprise given the currency and global growth headwinds mentioned above. Additional cause for some optimism:  The latest official release on the size of the U.S. economy in inflation-adjusted terms told much the same story of the trade gap narrowing for the “right reasons.”

But can the trade deficit keep falling due mainly to better exports, rather than following the typical slowdown and recession pattern of shrinking mainly due to the falling exports caused by weaker demand? In other words, can the falling deficit contribute to the quality of U.S. growth rather than simply reflect a feebler economy? Those are different questions altogether.

(What’s Left of) Our Economy: The U.S. Trade Deficit Falls Again — For the Wrong Reasons

Tags

Advanced Technology Products, ATP, Canada, CCP Virus, China, coronavirus, currency, euro, Eurozone, exchange rates, exports, goods trade, imports, Japan, lockdowns, Made in Washington trade deficit, manufacturing, non-oil goods trade deficit, services trade, trade deficit, Vietnam, yen, zero covid policy, {What's Left of) Our Economy

As of this morning’s official data, May makes two straight months during which the total U.S. trade deficit has fallen. The last time that’s happened? The second half of 2019, and then, the shortfall dropped sequentially six consecutive times – between June and November.

Normally such declines would be good news. But of course, these times still aren’t normal thanks to the lingering effects of the CCP Virus and more recently to the Ukraine War. And indeed, back in 2019, this trade gap narrowing took place as economic growth was slowing moderately, but the post-financial crisis expansion was nonetheless continuing. The more recent improvement is likely coming, as often happens, while the economy likely has slipped into recession.

The new Census Bureau release shows that right after it tumbled sequentially in April by a whopping 19.47 percent (a little more than first reported), the combined goods and services trade deficit shrank by another 1.32 percent in May, from $86.69 billion to $85.55 billion. For good measure, this shortfall was the lowest since December’s $78.87 billion.

The gap narrowed because exports advanced respectably and imports rose more sluggishly – a bit of encouraging news, especially considering the dollar’s recent strength (which by itself boosts the prices of U.S. goods and services both at home and abroad versus the foreign competition), and the many weak and/or weakening economies overseas (which increases the pressure they feel to grow by exporting to stronger and/or more open economies).

Even so, combined goods and services exports climbed by 1.20 percent on month in May, from an upwardly revised $252.85 billion to $255.89 billion – their fourth straight monthly record.

Overall imports, however, grew by just 0.56 percent – from a downwardly revised $339.54 billion to $341.44 billion.

The goods trade deficit sank by 2.65 percent sequentially in May, from an upwardly revised $107.82 billion to $104.96 billion – which, as with the overall trade gap was the best monthly level since December ($100.52 billion).

Unfortunately, in May the big services trade surplus that the United States has run for so long dropped sequentially for the first time in three months – and by 8.52 percent, from an upwardly revised $21.13 billion to $19.41 billion.

Goods exports were up 1.71 percent month to month in May, from a downwardly revised $176.02 billion to fourth straight all-time high of $179.03 billion.

Services exports rose, too, and to their second straight all-time high. But the increase was only 0.05 percent, from an upwardly revised $76.52 billion to $76.83 billion.

Goods imports also increased on month in May by just 0.05 percent, from $283.84 billion to $283.99 billion.

But services imports in May grew much faster – by 3.15 percent, from a downwardly revised $55.70 billion to a fourth straight monthly record of $57.46 billion.

The non-oil goods trade deficit is known to RealityChek regulars as the Made in Washington trade deficit, because by stripping out figures for oil (which trade diplomacy usually ignores) and services (where liberalization efforts have barely begun), it stems from those U.S. trade flows that have been heavily influenced by trade policy decisions.

In May, this shortfall was down 3.43 percent sequentially, from an upwardly revised $108.47 billion to $104.68 billion. That’s the lowest monthly total since February’s $103.29 billion.

No such luck with America’s enormous and persistent manufacturing trade deficit. It rose month to month in May by 6.58 percent, from $124.41 billion to a $132.60 billion level that was the second worst of all-time after March’s $142.22 billion.

U.S. exports of manufactures increased sequentially in May by 2.55 percent. And the new $112.15 billion in such sales was their second best ever, after March’s $113.96 billion.

But the much greater amount of manufacturing imports jumped by 4.82 percent, to $244.75 billion – another second best ever (after March’s $256.18 billion).

On a year-to-date basis, the manufacturing deficit is running 24.07 percent ahead of last year’s total, ($504.94 billion to $626.48 billion) which almost guarantees that this shortfall will hit its eleventh straight all-time high, in the process topping last year’s $1.3298 trillion.

Manufactures exports year-to-date have risen by 15.87 percent, but imports have surged by 20.01 percent.

The trade deficit in Advanced Technology Products (ATP) worsened in May as well, advancing 11.94 percent on month to $20.48 billion. ATP exports dipped by 0.71 percent, but imports were up by 3.94 percent.

Given the prominence of both manufactures and Advanced Technology Products in U.S.-China trade, it’s no surprise that as their global trade gaps widened in May, so did the U.S. goods deficit with the People’s Republic. Also at work on all these fronts: the partial easing of the Zero Covid policy-induced lockdowns that halted so much economic activity in China this spring.

The China goods shortfall rose by 3.18 percent, from $30.57 billion to $31.54 billion. And in a continuing departure from a recent pattern, this growth contrasted with the aforementioned 3.43 percent drop in the non-oil goods deficit that’s its closest global proxy.

For most of the time since the Trump tariffs on China started being imposed in 2018, the goods deficit with the People’s Republic actually had been falling while that Made in Washington gap kept growing, suggesting that the former President’s ongoing trade curbs had been achieving a major stated goal. On a year-to-date basis, the China deficit is still up slightly less (26.23 percent) than the Made in Washington deficit (27.56 percent). But clearly the difference between the two is shrinking.

One entirely possible reason is that China has devalued its controlled currency versus the dollar by 5.45 percent since the end of last year – which of course cheapens the price of Made in China products for reasons having nothing to do with free trade or market forces, and which suggests that rather than thinking about cutting or eliminating tariffs on these products, President Biden should be mulling some increases.

For May, U.S. goods exports to China improved sequentially by 9.99 percent, from $11.20 billion to $12.32 billion, while imports grew by 5.01 percent, from $41.77 billion to $43.86 billion.

In other May developments with major U.S. trade partners:

>The U.S. goods deficit with Canada soared by 35.84 percent on month, from $7.25 billion to $9.84 billion. That total was the second biggest ever after the $9.88 billion recorded back in July, 2008;

>A new record was set by the goods gap with Vietnam, and in fact, May’s $10.66 billion figure was the third new all-time high in the last three months and the fourth this year. These results largely reflect Vietnam’s mounting attractiveness versus China as a destination for export-focused foreign investment – in part due to the Trump tariffs and in part due to all the worsening difficulties of doing business in China;

>The goods deficit with the eurozone was up 8.08 percent, and worse is likely to come as the single currency keeps weakening versus the dollar and Europe, too, seems heading into or is already mired in a new recession;

>But despite the continuing weakening of the yen, the goods deficit with Japan fell by 6.86 percent. The ongoing global semiconductor shortage still plaguing the auto industry in particular looks like a big culprit here.

(What’s Left of) Our Economy: Is the New (April) U.S. Trade Report a False Dawn?

Tags

Advanced Technology Products, Biden, Census Bureau, China, Donald Trump, exports, goods trade, imports, Made in Washington trade deficit, manufacturing, non-oil goods trade deficit, services trade, South Korea, stimulus, supply chains, Switzerland, tariffs, Trade, trade deficit, Zero Covid, {What's Left of) Our Economy

Although today’s new official figures showed a major dropoff in the U.S. trade deficit between March and April, and the results came from a normally encouraging combination of more exports and fewer imports, the Census data also show that big caveats and questions are hanging over these results and how enduring they might be.

First and foremost, the improvement in the combined goods and services deficits, and all virtually all the trade balances comprising it, could be resulting from a dramatic slowdown in U.S. economic growth. Second, the latest decline in the chronic and huge U.S. goods trade gap with China surely stems from Beijing’s recent over-the-top (but surely temporary) Zero Covid policies, which have further snagged already tangled up supply chains. And third, large revisions in some of the numbers (especially for services trade) inevitably cast some doubt as to their reliability lately.

In fact, these features of the report – along with the still-near historic levels of many of these trade deficits and other usually typical gap-widening developments like a strong U.S. dollar and still-astronomical levels of economic stimulus from Washington – are telling me that my prediction last month of higher deficits to come will age pretty well.

Not that the narrowing of the trade gap in April was bupkis. The combined goods and services deficit fell 19.11 percent from March’s all-time high of $107.65 billion (which itself was revised down a hefty 1.96 percent) to $87.08 billion. This level was the lowest since December’s $78.87 billion and the nosedive the biggest since December, 2012’s 19.85 percent.

And as just mentioned, the improvement came from the right combination of reasons. Total exports hit their third straight monthly record, rising 3.49 percent from an upwardly revised (by 0.99 percent) $244.11 billion to $252.62 billion

Overall imports, meanwhile, tumbled 3.43 percent from their record $351.79 billion to $339.70 billion. The total was the second biggest ever, but the decrease was the greatest since the 13.16 shrinkage during pandemic-y and recession-y April, 2020.

The trade shortfall in goods was down 15.04 percent from a downwardly revised (by 1.04 percent) $126.81 billion in March to $107.74 percent in April. This level, too, was the lowest since December’s $100.52 billion, and the 15.04 percent sequential tumble the biggest since April, 2015’s 15.09 percent.

Goods exports rose sequentially by 3.57 percent in April, from 170.04 billion to a third consecutive record of $176.11 billion. And U.S. purchases of foreign goods sank by 4.38 percent on month in April, from a downwardly revised (by 0.65 percent) record $296.85 billion to $283.84 billion (as with total imports, the second highest result of all time). The decrease was the biggest since the 12.79 percent drop in that pandemic-y April, 2020.

But even the above sizable revisions paled before those made for services trade. The March surplus was upgraded fully 4.48 percent, from $18.34 billion to $19.16 billion, and the April figure grew by another 7.83 percent to $20.66 billion – the highest level since December’s $21.66 billion.

Services exports (apparently) deserve much of the credit. They reached an all-time high of $76.52 billion. This total bested May, 2019’s previous record of $75.41 billion by only 1.46 percent, but the milestone is significant given the outsized hit suffered by the service sector worldwide during the pandemic period.

April services exports, moreover, rose 3.30 percent from March’s $74.07 billion – a total that itself was revised up by 4.23 percent.

Services imports set their third consecutive monthly record in April, rising 1.73 percent, to $55.86 billion, from March’s upwardly revised (by 4.19 percent) $54.19 billion.

A big April fall-off also came in the non-oil goods trade deficit – known to RealityChek regulars as the Made in Washington trade deficit, because by stripping out figures for oil (which trade diplomacy usually ignores) and services (where liberalization efforts have barely begun), it stems from those U.S. trade flows that have been heavily influenced by trade policy decisions.

This shortfall decreased by 14.72 percent in April, to $108.68 billion, from March’s downwardly revised record $127.42 billion. The drop was the biggest since March, 2013’s 16.74 percent.

The enormous and persistent manufacturing trade deficit retreated in April from record levels, too. But even though the month’s $124.41 billion shortfall was 12.71 percent lower than March’s all-time high $142.22 billion, and even though the monthly decline of 12.71 percent was the biggest since pandemic-y February, 2020’s 23.09 percent, this deficit was still the second biggest ever.

April’s manufactures exports of $109.36 billion were 4.03 percent lower than March’s record $113.96 billion, but were still the second best total on record. Ditto for the month’s manufactures imports, which tumbled 8.85 percent from their March record of $256.18 billion to $233.50 billion.

Another April fall-off from a record monthly deficit came in advanced technology products (ATP). After ballooning by 73.65 percent sequentially in March, to $23.31 billion, the recently volatile gap narrowed in April by 21.50 percent, to $18.30 billion.

Both the better manufactuing and ATP trade figures surely stemmed at least in part from the Zero Covid policies that interfered with so much industrial production from China. The U.S. goods deficit with the People’s Repubic, however, narrowed by just 10.02 percent on month in April, from $34 billion to $30.57 billion. Even so, the level was the lowest since last July’s $28.56 billion.

U.S. goods exports to China were down on month in April by 16.25 percent (their biggest drop since February, 2021’s 278.85 percent), from $13.38 billion to $11.20b. This total is the lowest since last September’s $11.03 billion.

The much greater amount of U.S. goods imports from China plummeted 11.82 percent n month in April, from $47.37 billion to $41.77 billion – the lowest level since last July’s $40.32 billion.

Also notable – breaking a pattern going back several years — the 10.02 percent April monthly drop in the U.S. goods deficit with China was smaller than the month’s sequential decline in the non-oil goods deficit (14.72 percent). And on a yar-to-date basis, the China deficit is up only slightly less (27.59 percent) than the non-oil deficit (28.95 percent). So the next few months’ worth of data may shed some light on whether the Trump (now Biden) tariffs on China are losing their effectiveness, or whether the last few months’ numbers are anomalies.

Other significant April results for individual U.S. trade partners: The goods deficit with South Korea set a new record of $4.09 billion – 23.79 percent higher than March’s total of $3.30 billion and 21.70 percent greater than the old record of $3.36 billion set last September.

And the goods deficit with Switzerland cratered in April by 67.63 percent, to $2.89 billion, from March’s $8.93 billion level. The percentage shrinkage of this bilateral trade gap was the biggest since September, 2018, when a $1.22 billion U.S. deficit turned into a $149 million surplus.

(What’s Left of) Our Economy: A Terrible March for U.S. Trade – With Worse Likely to Come

Tags

Advanced Technology Products, Canada, China, currency, dollar, European Union, exchange rates, exports, Federal Reserve, goods trade, imports, inflation, Japan, Made in Washington trade deficit, manufacturing, Mexico, oil, services trade, Trade, trade deficit, {What's Left of) Our Economy

So many records (mainly the wrong kind) were revealed in the latest official monthly U.S. trade figures (for March) that it’s hard to know where to begin. Some important points need to be made before delving into them, though.

First, don’t blame oil. Sure, this trade report broke new ground in containing a full month’s worth of Ukraine war-period data. But despite the disruption in global energy markets triggered by the conflict, on a monthly basis, the U.S. petroleum balance actually improved sequentially, from a $2.94 billion deficit to a $1.58 billion surplus on a pre-inflation basis (the trade flow gauges from these monthly government releases that are most widely followed)

And even on an inflation-adjusted basis, February’s $8.73 billion oil deficit shrank to $5.15 billion in March.

Second, don’t blame inflation much at all. The Census Bureau doesn’t report after-inflation service trade results on a monthly basis, but it does provide this information for goods (which comprise the great majority of U.S. trade flows). And the March figures show that before factoring in inflation, the goods trade deficit worsened by 18.89 percent from $107.78 billon in February to a new record $128.14 billlion, whereas when inflation is counted, this gap widened on month by 18.86 percent, from $115.96 billion in February to $137.83 billion in March. (Major trade wonks will note that these goods and services data are presented according to two different counting methods, but trust me: the difference in results is negligible.)

Third, don’t blame China. The March pre-inflation goods deficit with the People’s Republic was up sequentially from $42.26 billion to $47.37 billion (12.10 percent). But neither that absolute level nor the rate of increase was anything out of the ordinary, much less a record. In fact, the monthly percentage increase was just half the rate of that of the shortfall for total non-oil goods (a close worldwide proxy for China goods trade) – which hit 24.06 percent. One big takeaway here: the Trump China tariffs are still exerting a major effect, along of course with the supply chain knots Beijing has created with its over-the-top Zero Covid policy.

But regardless of where the blame lies, (and it looks like major culprits are continued strong U.S. spending on both consumer goods and capital equipment, combined with an improvement of the supply chain situation outside China), all-time highs and worsts abounded in the March trade report, include worsenings at record paces.

The combined goods and services trade deficit jumped on-month by 22.28 percent, to $109.80 billion. That total was the third straight record for a single month and the increase the fastest since the 43.71 percent explosion in March, 2015 – a month during which much of the country was recovering from severe winter weather.

As mentioned above, the $128.14 billion goods trade gap was the highest ever, too, topping its predecessor (January’s $108.60 billion) by 17.99 percent. As for the 18.89 percent monthly increase, that was also the biggest since March, 2015 (25.18 percent).

Even a seeming trade balance bright spot turns out to be pretty dim. The headline number shows the service trade surplus improving by 1.96 percent – from $17.98 billion to $18.34 billion. Unfortunately, nearly all of this increase stemmed from a big downward revision in the initially reported February surplus, from $18.29 billion.

As known by RealityChek regulars, the aforementioned non-oil goods trade deficit can also be called the Made in Washington trade deficit – because by stripping out figures for oil (which trade diplomacy usually ignores) and services (where liberalization efforts have barely begun), it stems from those U.S. trade flows that have been heavily influenced by trade policy decisions.

And not only was the March Made in Washington deficit’s monthly increase of 24.06 percent the second fastest ever (after March, 2015’s 31.24 percent). The March, 2022 level of $128.70 billion was the biggest ever.

The story of the non-oil goods trade gap’s growth was overwhelmingly a manufacturing story. The sector’s huge and chronic trade shortfall shot back up from $106.49 billion in February (which was a nice retreat from January’s $121.03 billion) to a new record $142.22 billion. And the monthly percentage jump of 33.55 percent was the biggest since the 37.62 percent during weather-affected March, 2015.

Manufactures exports advanced sequentially by a strong 20.53 percent this past March. That topped the previous all-time monthly high of $105.37 billion (set back in October, 2014), by 8.15 percent. But the much greater volume of imports skyrocketed by 27.43 percent. And their $256.18 billion total smashed the old record of $222.79 billion (from last December) by 14.98 percent.

Within manufacturing, U.S. trade in advanced technology products (ATP) took a notable beating in March, too. The $23.31 billion trade gap was an all-time high, and its 73.65 percent monthly growth the worst since the shortfall slightly more than doubled on month in March, 2020 – as the Chinese economy and its huge electronics and infotech hardware manufacturing bases reopened after the People’s Republic’s initial pandemic wave.

Yet as noted above, despite these extaordinary manufacturing and ATP trade numbers, the latest March numbers for manufacturing-heavy U.S. China trade were anything but extraordinary. U.S. goods exports to the People’s Republic increased on-month by 15.36 percent – slower than the rate for manufactures exports globally, but the fastest rate since the 52.47 percent rocket ride they took  last October.

Goods imports from China, however, rose much more slowly from February to March than manufactures imports overall – by just 12.10 percent, from $42.26 billion to $47.37 billion.

When it comes to other major U.S. trade partners, the March American goods deficit with Canada of $8.03 billion was the highest such total since July, 2008 ($9.88 billion). It was led by a 30.81 percent advance in imports reflecting the mid-February reopening of bridges between the two countries that had been closed due to CCP Virus restrictions-related protests.

The goods deficit with Mexico worsened even faster – by 35.11 percent, to $11.92 billion. That total was its highest since August, 2020’s $12.77 billion.

Another major monthly increase (31.59 percent) was registered by the U.S. goods shortfall with the European Union, but its March level ($16.87 billion) was subdued relative to recent results.

Anything but subdued was the Japan goods shortfall, which shot up sequentially in March by 49 percent. The $6.77 billion total also was the biggest since November, 2020’s $6.78 billion, and the monthly jump the greatest since the 84.37 percent burst in July, 2020, during the rapid recovery from the sharp U.S. economic downturn induced by the first wave of the CCP Virus and related economic and behavior curbs.

The Europe and Japan trade figures stem significantly from a development that’s bound to turn into an increasingly formidable headwind for the U.S. trade balance for the foreseeable future – the dollar’s rise versus other leading currencies to levels not seen in 20 years. And unless it’s reversed substantially soon, China’s latest currency devaluation, which began in mid-April, will weaken the effects of both the Trump tariffs and the Zero Covid policy. So even if the Federal Reserve’s (so far modest) inflation-fighting efforts do slow the American economy significantly, it’s likely that, as astronomical as the March trade deficits were, we ain’t seen nothin’ yet.

(What’s Left of) Our Economy: A Rough January for U.S. Trade

Tags

Advanced Technology Products, ATP, China, goods trade, Made in Washington trade deficit, manufacturing, non-oil goods deficit, Russia, services trade, tariffs, Trade, trade deficit, Ukraine, Ukraine invasion, Ukraine-Russia war, {What's Left of) Our Economy

As known by RealityChek readers, yesterday I decided to put off finishing my normal same-day report on the new official monthly U.S. trade figures in order to spotlight some critical (and oddly neglected) developments in the Ukraine war/crisis.

But the trade results (for January) are still worth examining in detail, even though (as always), they’re lagging indicators, and even though they of course pre-date all the likely disruption to the global economy and U.S. trade flows seemingly sure to stem from the Russian invasion of Ukraine and ensuing conflict.

Notably, the combined goods and services trade gap hit its second straight monthly record in January, rising 9.43 percent sequentially, to $89.69 billion. Moreover, the deterioration came on virtually all key fronts. And the December total was revised up by a big 1.52 percent, from $80.73 billion to $81.96 billion.

The January goods deficit increased, too and hit its third consecutive record. The increase was 6.99 percent, from an upwardly revised $101.75 billion to $108.86 billion.

Meanwhile, the longstanding U.S. surplus in services, which has been considerably depressed by a CCP Virus pandemic that’s hit this sector particularly hard the world over, sank by 4.40 percent, from $19.79 billion to $19.17 billion. The sequential decrease came to 3.13 percent, the decline was the first since August, and the downward revision of the initially reported December level was a huge 4.40 percent.

Total exports fell on month for the first time since September – by 1.73 percent, from an upwardly revised and all-time high of $228.35 billion to $224.40 billion.

Goods exports dipped, too, and also for the first time since September. The decline was 1.47 percent, from a downwardly revised $158.21 billion to $155.89 billion.

As for services exports, they sagged by 2.32 percent, from an upwardly revised $70.14 billion to $68.51 billion. This decline was the first since August.

Overall imports climbed by 1.04 percent, from an upwardly revised $310.30 billion to $314.09 billion, and they hit their sixth monthly record in a row.

Goods imports rose 1.84 percent, from an upwardly revised $259.96 billion to $264.75 billion, and achieved their fifth consecutive all-time high.

Services imports in January, however, decreased month-to-month for the second time in a row – which hasn’t happened since January and February, 2021. The fall-off was 2.01 percent, from an upwardly revised $50.35 billion to $49.34 billion. That latter total was the lowest since August, and the December revision was a substantial 2.38 percent.

As known by RealityChek regulars, non-oil goods trade is the vast portion of U.S. trade flows heavily affected by America’s trade deals and other trade policy decisions – hence my monicker “Made in Washington” trade. (Trade liberalization in services remains at an early stage globally, and oil is rarely on the table in national trade policy-making or diplomacy.)

The export-import gap in this category hit its third straight record in January, widening by 6.55 percent, from $100.56 billion to $107.15 billion.

Non-oil goods exports sank sequentially by 1.72 percent, from $138.38 billion to $136.00 billion, while imports set their fifth straight record. They increased by 1.76 percent, from $238.94 billion to $243.14 billion.

The nation’s oil trade gap soared on a relative basis in January – nearly quadrupling on a pre-inflation basis (the same gauge used for all the numbers in RealityChek trade reports unless specified otherwise). But the January total of $426 million was tiny in absolute terms.

The two big (but modest) exceptions to the January pattern of expanding trade shortfalls came in manufacturing and Advanced Technology Products (ATP).

The former’s chronic and mammoth trade deficit actually retreated for the second straight month in January. The decline was 1.32 percent – from December’s $122.65 billion to $121.03 billion. But the new total was still the third highest ever.

Manufacturing exports plunged by 7.80 percent on month in January, from $100.14 billion to a $92.33 billion level that was the lowest monthly total since August’s $97.13 billion.

Industry’s imports shrank by 4.23 percent in January, from a record $222.79 billion to $213.36 billion – the lowest since September’s $211.33 billion.

The decrease in the January ATP trade deficit was 1.77 percent, from $19.80 billion to $19.45 billion, and the drop was the second in a row – a first since last June and July.

ATP exports plummeted in January from a record $34.46 billion to $29.65 billion. That 13.96 percent drop was the biggest such figure since the 16.55 percent nosedive in January, 2020 – as the pandemic was raging through and locking down China. And the January figure was the lowest since August’s $29.49 billion.

ATP imports were off significantly, and from a record, too. The December-January swoon of 9.66 percent, from $54.36 billion to $49.11 billion, was the biggest since last February’s 13.09 percent, and brought these purchases to their lowest level since last August’s $45.56 billion.

The enormous U.S. goods deficit with China was up in January, but by just 0.61 percent sequentially, from $36.15 billion to $36.37 billion. The increase was much smaller than that for non-oil goods (the closest global proxy for U.S.-China trade) – and adds to the evidence (see most recently here) that the Trump China tariffs have helped rein in this trade gap. But the monthly level was the highest since December, 2018’s $36.60 billion.

U.S. goods exports to China, however, decreased in January for the third consecutive month – by 14.27 percent, from $13.38 billion to $11.47 billion. That drop, moreover – to the lowest level since last September’s $10.91 billion – illustrates again, how short the Trump Phase One trade deal with China keeps falling of its targets.

U.S. goods imports from China declined as well in January – by 3.41 percent, from $49.53 billion to $47.85 billion. That shrinkage was the first since last April, and brought the monthly total to its lowest level since September’s $47.41 billion.

Since, as noted, these January trade figures predate the invasion of Ukraine (as will February’s), future prospects are especially murky.  So the wisest course of action seems to be holding off on the prognostication and focusing on data as it comes out until some clarity emerges – at least until the next next global shock.   

(What’s Left of) Our Economy: A Record Number of Records in U.S. Trade II

Tags

Advanced Technology Products, ATP, Biden, CCP Virus, China, coronavirus, COVID 19, Donald Trump, Federal Reserve, goods trade, interest rates, Made in Washington trade deficit, manufacturing, monetary policy, non-oil goods trade deficit, services trade, tariffs, Trade, trade deficit, trade war, Wuhan virus, {What's Left of) Our Economy

Just because yesterday’s first RealityChek post on the U.S. government’s latest official trade data focused on all the monthly records set by the December monthly results doesn’t mean that the annual figures for 2021 were lacking in all-time highs and lows – and for the same CCP Virus-related reasons.

So let’s get to them – and conclude with some needed context. For as known by RealityChek readers, isolated data don’t tell all the story, or even the most important part of the story. And the big takeaway from examining the context is that in a surprising number of ways, 2021 looked pretty ordinary trade-wise.   

For now, though, let’s start by noting that last year’s combined goods and services trade deficit hit a record $859.13 billion – the second straight all-time high, and a 26.96 percent jump from 2020’s $676.68 billion.

But don’t think that annual increase was in a class by itself. Far from it. Here are the first bits of context: As recently as 1998 and 1999, the total trade gap widened by 53.45 percent and 53.97 percent, respectively. In 1984 and 1993, the figures were 88.82 percent and 79.31 percent, respectively.

Further, in 1983, the trade shortfall more than doubled (surging by 139.14 percent), and in1972 and 1977, it more than quadrupled. In addition, three times during the 1970s, the trade balance switched from surplus to deficit, and in the 1960s, major drops in the surplus occurred.

Even so, it’s crucial to remember that during these periods, oil and its price changes were major chunks of U.S. trade flows and deficits. Big rises in the dollar’s value have also often contributed substantially to big past increases in the trade shortfall. And never forget that the absolute numbers were much smaller then, so large percentage changes were much easier to generate.

Still, the trade deficit’s growth last year ranks as pretty impressive. Ditto for the fact that unlike was the case for decades, it’s largely unrelated to oil (although the small $13.98 billion surplus in this sector turned into an $8.44 billion deficit).

Speaking of oil’s role in U.S. trade, as known by RealityChek regulars, it matters in part because it’s rarely the subject of trade deals and other trade policy decisions. In fact, stripping out from U.S. trade flows oil and services (where liberalization efforts have made relatively little progress) yields the statistics for non-oil goods – the trade flows that are heavily influenced by U.S. trade policy.

And 2021 represented the seventh straight year of record deficits in this “Made in Washington” trade account. Moreover, the $1.06993 trillion level topped 2020’s by 15.66 percent. This increase, though, impressive as it was, was well short of the biggest in history, too (in a series going back to 1992). That dubious distinction goes to 1993’s 76.63 percent, but as recently as 2015, the Made in Washington deficit was climbing at a 21.23 percent annual rate.

Last year’s goods trade gap of $1.09068 trillion was the second straight all-time high and an 18.29 percent widening from 2020’s $922.03 billion. Again, however, the all-time worst is orders of magnitude higher (227.86 percent in 1977), and all the aforementioned influences and qualifiers apply. But as recently as 2010 (another first year of recovery following a steep economic downturn), the goods deficit was up 27.27 percent on year.

The $231.55 billion surplus in U.S. services trade was no record, either, but it was the lowest annual total since 2012’s $215.21 billion, reflecting how hard this sector has been hammered by the pandemic and the economic policy and behavior curbs it’s spawned.

In terms of trade flows closely followed by RealityChek, the huge and chronic deficit in manufacturing soared by 19.23 percent year-on-year in 2021, from $1.11527 trillion to $1.32977 trillion. The shortfall was an eleventh straight annual record and the fourth consecutive year it topped the trillion-dollar mark. The annual increase was high by recent standards, but smaller than 2010’s 27.90 percent.

The Advanced Technology Products (ATP) category saw its fifth straight record annual deficit, and the $197.16 billion total was 3.13 percent above 2020’s $191.18 billion.

The also huge and chronic U.S. goods trade deficit with China was up 14.52 percent on year in 2021, from $310.26 billion to $355.30 billion. Not only was this figure well below the record $418.23 billion set in 2018, but the annual increase was slower than in the non-oil goods deficit – which indicates that the sweeping and often steep Trump administration tariffs on imports from the People’s Republic have been having their intended effects.

Total U.S. exports grew by a healthy 18.46 percent on year in 2021, from $2.13444 trillion to $2.52854 trillion. But they’re still below the all-time high of $2.53864 trillion, set in 2018.

Goods exports were up on year in 2021, too – by 23.32 percent, from $1.42880 trillion to $1.76197 trillion, but also remain lower than their peak – the $1.67691 trillion also achieved in 2018.

The hard hit services industries managed an 8.63 percent annual improvement in exports in 2021, from $705.64 billion to $766.50 billion. But they still remain 12.52 percent shy of their record of $876.30 billion, set in 2019.

Non-oil goods exports rose to an all-time annual high of $1.55849 trillion in 2021 – a figure 20.42 percent higher than 2020’s $1.29421 trillion. But they’re also short of a 2018 record ($1.49101 trillion).

Domestic manufacturing boosted its exports even faster last year – by 18.91 percent, from $953.02 billion to $1.13325 trillion. But it’s all-time high of $1.19227 trillion dates from way back in 2014!

Despite ATP overseas sales advancing by a nearly as strong 18.57 percent, in 2021, from $300.78 billion to $356.62 billion, they’re still below their record, too – 2018’s $368.63 billion.

U.S. goods exports to China were 21.35 percent higher in 2021 than in 2020 – rising from $124.49 billion to $151.07 billion. The growth rate of 21.35 percent was slightly higher than that for global proxy non-oil goods – a likely result of former President Trump’s 2020 Phase One trade deal.

Arguably more impressive, it was the fastest such growth since the 32.25 percent hit in 2010, when the United States was recovering from the Great Recession. (The best performance in U.S. goods exports to China came way back in 1988 – 43.59 percent – when the absolute numbers of course were tiny.)

The nation’s import figures continued the string of trade flow records. Combined goods and services imports of $3.38767 trillion were an all-time high, and grew 20.51 percent over 2020’s $2.81113 trillion. They also blew past the previous peak of $3.11959 trillion, set in 2018.

Stronger growth (21.35 percent) was registered by goods imports, which expanded from $2.53083 trillion to $2.82565 trillion. The previous high – which also came in 2018 – was $2.55566 trillion.

In services, annual import growth was just 16.23 percent in 2021 – rising from $460.30 billion to $535.02 billion. The yearly record for these purchases was 2019’s $591.12 billion,

The record story remained intact in non-oil goods imports. These increased from $2.21934 trillion to $2.62842 trillion – an 18.43 percent growth rate. The previous all-time high for these imports was 2018’s $2.31086 trillion.

Imports in manufacturing reached their own record in 2021 – $2.64303 trillion. That surpassed 2018’s previous all-time high of $2.17711 trillion and topped 2020’s $2.06829 trillion level by 19.09 percent.

For ATP, annual imports advanced by 12.52 percent in 2021 – from $491.96 billion in 2020 to $553.78 billion. The previous record was just $496.06 billion, also set in 2018.

And Americans bought $506.37 billion worth of goods from China in 2021. That topped 2020’s $434.75 billion total by 16.47 percent, but was considerably short of 2018’s record $538.51 billion and the growth rate was slower than that for global proxy non-oil goods – likely another effect of the Trump tariffs that have been largely maintained by President Biden.

But true to the truth that context is crucial, let’s return to that methodology. The main context for last year’s record trade deficits is their size compared with that of the entire economy. And here, in particular, 2021 doesn’t look like such a trade disaster.

Specifically, the combined goods and services deficit as a share of total gross domestic product (GDP) in pre-inflation dollars (to produce apples-to-apples results) came to 3.74 percent in 2021. That’s a big jump from 2020’s 3.24 percent. But it’s not only lower than the record 5.53 percent of 2006, but than the 5.50 percent of 2005, the five percent of 2004, the 4.91 percent of 2007, the 4.82 percent of 2008, and the 3.85 percent of 2002.

Nor is the 2021 growth rate of 15.43 percent in this share unheard of – or even close. For example, during the first calendar year of the economy’s recovery from the Great Recession, in 2010, it was up by 22.34 percent. And between 1999 and 2000, it soared by 35.71 percent. (The growth rate was twenty percent in also pandemic distorted 2020.)

The same goes for the goods deficit as a share of GDP. Last year it was 4.74 percent – a 7.48 percent increase from 2020’s 4.41 percent. But the 4.74 percent figure has been exceeded no fewer than six times going back to 1999 alone. And the growth rate has been topped by 2011’s 10.21 percent, 2010’s 22.44 percent, 2005’s 10.29 percent, 2004’s 15.01 percent, 2003’s 8.74 percent, 2002’s 9.02 percent, and 2000’s 24.57 percent (the 21^st century record), along with 9.43 percent in pandemic-distorted 2020.

The Made in Washington trade deficit as a share of GDP did hit a 21^st century record in 2021 – 4.65 percent. And before 2020’s 4.43 percent, the next highest such figure was 2005’s 4.17 percent. But here, too, the 2021 growth rate in the deficit as a share of GDP of 4.97 percent is ordinary. Leaving aside 2020’s 13.30 percent, it’s been bested no fewer than nine times since 2000, including the record 18.84 percent in 2010.

As a result, it’s not entirely unreasonable to approach 2022 with some trade optimism. Big wild cards remain – mainly how the CCP Virus evolves, how effective the U.S. and global responses become, the future of those China tariffs, and Federal Reserve’s upcoming decisions on interest rates and bond-buying – which could greatly influence the economy’s growth rate.

But if there’s a case that even with all the virus-related distortion and massive government stimulus, the U.S. trade numbers were held in check last year, there’s one that even better results may soon start appearing.        

(What’s Left of) Our Economy: More of the (Wrong Kind of) Records in the New U.S. Trade Figures

Tags

Canada, CCP Virus, China, coronavirus, COVID 19, Delta variant, Donald Trump, Europe, exports, goods trade, imports, Made in Washington trade deficit, manufacturing, non-oil goods trade deficit, services trade, Taiwan, tariffs, Trade, trade deficit, trade policy, trade war, Wuhan virus, {What's Left of) Our Economy

About a week ago, I wrote here that the new (second quarter) figures on U.S. economic growth displayed some tentative signs of pre-pandemic normality returning to the nation’s CCP Virus-disrupted trade flows. This morning’s release of the detailed official U.S. trade figures for June reveals that those signs (which came from the inflation-adjusted numbers) were awfully tentative, and that pandemic distortions remain the order of the day.

Indeed, the June trade data brought to an end for the time being the pattern this calendar year of the total U.S. deficit and goods shortfall statistics stabilizing on a monthly basis, along with the crucial non-oil goods gap data. As known by RealityChek regulars, those trade flows can be called the “Made in Washington” portion of U.S. trade, since they make up the category of imports and exports whose levels and changes are most influenced by U.S. trade policy. In that way, they differ from oil trade (which is almost never the subject of trade negotiations and other policy decisions) and services trade (where liberalization efforts worldwide have made only modest progress). Moreover, manufacturing trade in June exhibited the same discouraging characteristics. 

There is one important exception to June’s trend break: The China goods deficit and goods import numbers changed only slightly (for the worse). In fact, they’ve stayed in the same neighborhoods since China’s export-heavy economy rebounded from its own virus-induced shutdown in early 2020. These results look like strong indicators that the Trump tariffs have played major roles in reducing the harm done to the U.S. economy by Beijing’s predatory trade practices. So does the resilience throughout the pandemic shown by U.S. domestic manufacturing – since industry dominates Sino-American trade flows.

But the trade records set in June remain noteworthy. After staying right around $70 billion on average since January (with the exception of a brief March move to just over $75 billion), the combined goods and services shortfall rose 6.70 percent,from $70.99 billion in May to $75.75 billion in June – an all-time high that broke the record set in March.

Since goods make up the great majority of U.S. trade flows, it wasn’t surprising that their deficit pattern was identical. They remained consistently in the high $80 billions since January (also with the exception of March) and then grew in June by 4.53 percent, from $70.99 billion to $75.75 billion. And this total also replaced March’s total as the new record.

The pattern was the same for Made in Washington trade. Its monthly deficit totals, except for March, remained in the high $80 billion range since January, too, then broke out in June from $86.73 billion to $92.42 billion – a rise of 6.56 percent to another all-time high that surpassed a previous March record.

Services trade set no records in June, but its $17.43 billion surplus was the smallest since August, 2012’s $17.08 billion. Because the CCP Virus’ Delta variant hadn’t raised the prospect of more economic curbs back in June, this figure will be worth following closely, since services are so vulnerable to virus-prompted restrictions.

Combined U.S. goods and services exports did bump up by 0.58 percent on month in June, from May’s $206.47 billion to $207.67 billion. In addition, that represented the biggest monthly total since the $209.88 billion recorded in December, 2019 – just before the pandemic is thought to have arrived in the United States. But the much greater amount of total imports climbed by 2.15 percent, from $277.46 billion to a new record of $283.42 billion.

At $145.91 billion, goods exports set their fourth straight monthly record in June. But they continued to improve slowly – by just 0.19 percent over the May total. In fact, since March, they’ve only advanced by 1.57 percent in all on a monthly basis, no doubt in part to relatively sluggish growth in most of the world outside the United States.

The much larger amount of goods imports climbed much faster in June – by 1.84 percent on month, to reach their second straight all-time high of $239.09 billion.

As for services, exports in June advanced by a respectable 1.53 percent, to $61.76 billion. The monthly improvement was the fourth straight, and their best performance since February, 2020’s $69.12 billion. But clearly these levels remain depressed.

Services imports in June also set a post-February, 2020 high ($44.35 billion versus $47.06 billion) and increased for the fifth straight month. But they rose more than twice as fast (3.84 percent) as services exports, and their levels are also well below pre-CCP Virus levels.

America’s non-oil goods exports actually fell sequentially on month in June – by 1.62 percent, from a record $129.66 billion in May to $127.56 billion. The much greater amount of imports, however, grew by 1.66 percent, to $219.98 billion, a level that slightly topped the previous all-time high of $219.68 billion set in March.

The U.S. goods trade deficit with China did worsen in June – from May’s $26.32 billion to $27.84 billion. But the 5.79 percent increase trailed that of the non-oil goods gap, the closest global proxy (6.56 percent). The year-to-date totals tell the same story: The China goods shortfall is up more slowly ( 20.81 percent) than the global Made in Washington deficit (24.59 percent).

Back to the monthly figures, U.S. goods exports to China fell by 2.49 percent between May and June – from $12.41 billion to $12.10 billion. Imports, however, were 3.13 percent higher ($38.73 billion to $39.95 billion).

Especially interesting: On a monthly basis, U.S. goods imports from China have inched up only from $39.11 billion to $39.95 billion. For all non-oil goods by this measure, U.S. imports have risen much faster – from $205.08 billion to $219.98 billion. So it seems clear that the Trump tariffs keep pricing many Chinese goods out of the U.S. market.

But although America’s China and non-oil goods trade shortfalls have stayed fairly stable on a monthly basis since January, its manufacturing trade gap has widened substantially. Already lofty enough during the first month of the year at $99.79 billion, it stood 4.87 percent higher in June – $114.06 billion.

Further, this total broke the previous record of $110.20 billion, set last October.

Domestic manufacturing exports improved by 1.81 percent on month, from $95.33 billion to $97.06 billion. But the much greater amount of imports jumped by 4.49 percent, from $202.04 billion to $211.11 billion.

On a year-to-date basis, moreover, the manufacturing deficit has surged by just under 30 percent. At $622.12 billion as of June, it’s headed toward an all-time annual record.

Other manufacturing records or multi-year highs revealed by the June data included a record monthly deficit of $28.14 billion goods deficit with Europe (including its eastern and western regions, as well as Russia); the third consecutive record monthly goods deficit with new world semiconductor manufacturing technology leader Taiwan ($3.49 billion); and the highest goods deficit with Canada ($5.46 billion) since October, 2008 ($5.65 billion).

A single month’s worth of data doesn’t prove anything, so truly credible judgments about the possible return to pre-pandemic U.S. trade normality still can’t be made based on the data. Also crucial is examining trade figures and their changes against the backdrop of the entire economy’s size and its changes, in order to provide crucial context. When looking at growth and contraction rates in particular the challenge is difficult because trade flow changes only affect the rest of the economy after the passage of some time. 

And of course, if the virus’ Delta variant prompts major, nation-wide U.S. economic restrictions and behavior changes, all trade – and broader economic – forecasting bets are off for the time being.        

(What’s Left of) Our Economy: Latest Figures Leave the U.S. Trade Picture as Foggy as Ever

Tags

aerospace, aircraft, Boeing, Canada, CCP Virus, China, coronavirus, COVID 19, Donald Trump, exports, goods trade, imports, Made in Washington trade deficit, manufacturing, non-oil goods deficit, reopening, services trade, tariffs, Trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

With huge Chinese ports newly suffering the kind of congestion that’s clogged America’s West Coast ports for months, the U.S. and other national economies reopening at widely varying rates from their CCP Virus-induced shutdowns, and a worldwide shortage of semiconductors still undermining production throughout the world’s manufacturing industries, it’s tougher than ever to figure out what to make of the latest monthly U.S. trade figures (for May).

Oh, and I almost forgot: America’s long-time export and trade surplus standout, Boeing, keeps making bad news on the intertwined manufacturing and safety fronts, which means that its domestic and overseas sales could be depressed for months more.

So since they’re of such little help in figuring out the two biggest trade policy questions facing the country – about how different a post-pandemic trade normal may look from its pre-virus counterpart, and whether and how well the Trump tariffs are still working – it seems the best course to follow is simply reporting the highlights of the May report from the Census Bureau (and voicing some very tentative analyses where I have the courage).

These new data, which came out last Friday, revealed that the combined U.S. goods and services trade deficit increased by 3.14 percent between April and May – from $69.07 billion to $71.24 billion. The total was the second highest ever, trailing only March’s $75.03 billion.

The same general pattern characterized the goods trade gap, which widened by 2.76 percent (from $86.78 billion to $89.17 billion), also hit the second highest total on record, and also fell short of a March all-time high ($92.86 billion).

The best trade balance-related news came on the services side – which has been especialy hard hit by the virus and its effects, and where the surplus widened by 0.74 percent (from $17.80 billion to $17.93 billion) and improved for the first time since January.

Total exports advanced for the fourth straight month in May (by 0.64 percent, from $204.70 billion to $206.02 billion), and attained their highest level since December, 2019, just before the CCP Virus seems to have begun spreading from China.

Goods exports were something of a laggard – growing sequentially in May by just 0.30 percent (from $145.09 billion to $145.28 billion. More encouragingly, this level set its second straight monthly record.

Services exports fared better, up 1.47 percent on-month in May (from $59.62 billion to $60.49 billion) and producing their best monthly total since semi-pandemic-y March, 2020’s $60.62 billion.

But on all counts, U.S. imports rose faster.

The total import amount reached $277.26 billion in May, rising 1.27 percent from April’s $273.78 billion and representing the second highest total ever. Only the $277.69 billion figure from…yes…March has been higher.

Goods imports rose by a slower 1.18 percent, from $231.96 billion to $234.70 billion. And the total was another second highest, lagging only March’s $236.52 billion.

Despite their surplus growing, services imports rose considerably faster, by 1.77 percent, from $41.84 billion to $42.56 billion. That total was the highest since February, 2020 ($47.06 billion) – just before the virus’ arrival.

To a noteworthy degree, the worsening of the overall and goods deficits in May looks like a Boeing story. The narrowing of the U.S. civilian aircraft trade surplus (by $1.388 billion) accounted for nearly 64 percent of the increase deterioration in the overall trade balance, and 58.05 percent of the monthly growth of the goods trade gap.

Boeing’s troubles can’t be blamed for the entire year’s lofty deficit numbers. Far from it. In fact, between the January-to-May periods last year and this year, the $917 million shrinkage of the aircraft surplus has equalled less than one percent of the overall deficit’s increase during this time and just slightly more of the goods deficit. Aircraft trade numbers can be pretty volatile, too. But is the Boeing effect on the May data a portent of things to come? Stay tuned.

As known by RealityChek regulars, the best measure of how tariffs and similar trade policies are influencing U.S. trade flows is non-oil goods trade, which strips out oil (which hardly ever comes up in trade policymaking) and services (where global trade liberalization remains modest). And in this context, what jumps out right away from the May trade results (or what should jump out) is that this portion of the trade deficit rose much more slowly on month (0.33 percent) than the combined goods and services deficit (3.14 percent) or the total goods deficit (2.76 percent). And interestingly, without the poor civilian aircraft numbers, the “Made in Washington” trade deficit would have fallen month-to-month.

Moreover, on a January-to-May year-to-date basis, the non-oil goods trade deficit worsened just about half as much (by 23.99 percent) as the overall deficit (45.82 percent), and somewhat more slowly than the goods deficit (26.44 percent). Given that the Trump China tariffs alone of some $350 billion amounted to some 15.21 percent of total U.S. non-oil goods imports in 2019 (and remain in place today), that could be a sign that the levies have succeeded in restraining that deficit’s growth. When it comes to the Boeing effect, however, it’s negligible here, too.

May was an especially bad month for U.S. manufacturing trade, as its chronically huge shortfall jumped by 3.01 percent, from $103.60 billion to 106.72 billion. Huge as that sounds, it was only the fifth worst such figure ever. Exports increased by 0.91 percent while the much greater amount of imports climbed by 2.01 percent. Again, the Boeing effect generated much (nearly 45 percent) of the monthly deficit worsening but less than one percent of the $116.57 billion year-to-date difference.

May was also a bad month for China tariff supporters. The U.S. goods deficit with the PRC grew by 1.90 percent on month – much faster than the 0.33 percent increase in the non-oil goods deficit that’s its closest worldwide proxy. U.S. goods exports to the PRC advanced by a healthy 5.54 percent. May monthly imports grew much more slowly (3.04 percent), but they’re more than three times greater.

On a year-to-date basis, moreover, the Sino-American trade gap is 26.92 percent wider than last year, which stands not only as faster growth than that of the non-oil goods deficit (23.99 percent), but another sign that of tariff failure, as the China deficit by this measure has been rising faster non-oil goods deficit since March. Still, it’s difficult drawing firm conclusions, since the recovery of China’s export-heavy economy from its pandemic experience has been faster than that of most other (often also export-reliant) U.S. trade partners. Moreover, the difference between the growth rates of the two deficits has narrowed dramatically since March, so it’s possible that the pre-pandemic pattern – which reflected much better on the tariffs – is steadily returning.

And let’s end on an unexpected note: In May, the U.S. goods deficit with Canada surged by 56.98 percent sequentially, to $3.69 billion. That’s the highest level since December, 2019’s $4.95 billion and the fastest monthly increase since January’s 74.04 percent. This monthly rise, moreover, was driven by U.S. imports, which reached $29.08 billion – the biggest monthly total since October, 2014 ($30.72 billion). The monthly increase: a strong but hardly record breaking 5.86 percent. American goods exports to its northern neighbor, however, rose by just 1.09 percent, to $25.39 billion. And year-to-date, the U.S. goods deficit with Canada has more than doubled, soaring by a 108.93 percent.

(What’s Left of) Our Economy: A Trump-y New U.S. Trade Report – in a Good Way

Tags

Biden, CCP Virus, China, coronavirus, COVID 19, Donald Trump, exports, goods trade, imports, Made in Washington trade deficit, manufacturing, non-oil goods trade deficit, Phase One, services trade, Trade, trade deficit, trade war, Wuhan virus, {What's Left of) Our Economy

Although it covered a presidential transition month, there wasn’t much transitional about the official U.S. international trade figures for January that came out Friday. Trump-y policy fingerprints were all over them – and mostly in a good way – mainly in the form of continuing declines in the monthly deficits for China and the manufacturing sector, two main targets of the former President’s efforts to reduce the overall shortfall.

At the same time, also visible were the distorting affects of the CCP Virus, and the stop-and-start nature of so much economic activity in the United States and throughout the world, which seem certain to impact all economic data for several more months.

Overall, the combined goods and services trade deficit rose 1.86 percent sequentially in January, and the $68.21 billion total was the second highest on record – after November’s $69.04 billion. The goods deficit also hit its second largest total in history, with its $85.45 billion level representing a 1.58 percent increase over December’s total, and trailing the $86.89 billion all-time high also set last November. The services surplus, meanwhile, inched up on month in January by 0.47 percent, to $17.24 billion. This monthly improvement was the first since June for this virus-battered segment of the U.S. and world economies.

Total exports rose by a mere 0.53 percent, to $191.14 billion, and goods exports grew by 1.56 percent, to $135.66 billion. These were the best monthly performances in both categories since last February. Services exports, however, dipped for the first time since July, with the 0.47 percent monthly January decrease bringing the level to $56.28 billion.

A new record was set on the import side – January goods purchases from abroad reached $221.11 billion, surpassing October, 2018’s 218.91 billion, and exceeding December’s total by 1.57 percent. Total imports grew by 1.19 percent on month, to $260.16 billion, but services imports fell sequentially in January by 0.88 percent, to $39.05 billion – the first monthly decrease since May.

In an apparent setback for Trump’s tariffs and other elements of his trade policy, January also saw the second highest monthly deficit in U.S. non-oil goods trade. RealityChek regulars know these trade shortfalls as the “Made in Washington trade deficit”, since they strip out the results for petroleum and services – sectors that are rarely dealt with in trade deals or similar policies, and in which liberalization efforts remain minor.

But the $85.52 billion January level has been topped only by November’s $86.40 billion.

Nonetheless, the U.S. manufacturing deficit in January sank by 6.32 percent, from $106.52 billion to $99.79 billion. The decrease was the third straight, and the monthly gap was the smallest since last June’s. Manufacturing exports declined by 3.47 percent sequentially, to $81.66 billion, while imports dropped by a greater 5.05 percent, to $181.46 billion.

One big reason for this encouraging manufacturing performance was the January narrowing of the manufacturing-heavy U.S. goods deficit with China. January’s $26.50 billion total was 3.60 percent lower than December’s $27.23 billion, and the best such figure since May’s $26.96 billion.

U.S. goods exports to the People’s Republic plunged sequentially by 12.19 percent, to $12.86 billion, and this fall-off was especially discouraging given Beijing’s commitments under the year-old Phase One trade deal to boost imports. Moreover, the monthly decrease (to the lowest level since October) was the biggest percentage-wise since the January, 2020 crash dive of 18.96 percent, when much of China’s economy was shut down by the virus.

Yet China’s much greater goods exports to the United States fell by 6.60 percent, from $41.86 billion to $39.11 billion. This monthly total was the lowest since July’s $40.66 billion, and the sequential decrease also was the third straight. This slump, coming on top of the 3.59 percent decrease in U.S. goods imports from China in 2020, was no doubt due in part to the Trump tariffs on some $360 billion worth of Chinese goods that were as central to the former President’s China trade policies as the trade deal, and that President Biden has decided to keep so far.

Even more important, it can’t be a complete coincidence that U.S. manufacturing output has held up well during the pandemic period as these levies stayed in place. They must have played a significant role in preventing Chinese products from outcompeting their domestic counterparts for the American demand for manufactures that the virus left over.

As a result, the clearly related China and manufacturing performances could be teaching a valuable lesson to the Biden administration: Although virus-related distortions to U.S. trade flows will end sooner or later for reasons only partly related to official policy decisions, the fate of Trump’s China tariffs is entirely up to the President. That makes his eventual decision whether to continue or lift them the most important trade-related wildcard of all still facing the U.S. economy.