(What’s Left of) Our Economy: The Deepening Mystery of Trump’s NAFTA Strategy

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autos, Canada, light trucks, manufacturing, Mexico, NAFTA, Nick Carey, North American Free Trade Agreement, Reuters, ROO, rules of origin, tariffs, Trade, Trump, wages, {What's Left of) Our Economy

The Trump administration’s approach to the North American Free Trade Agreement (NAFTA) keeps getting murkier. And although I agree that keeping the other parties to a negotiation off balance from time to time, and holding cards close to one’s vest, can be excellent tactics, the latest apparent twist in American policy doesn’t appear to be explained by such considerations.

Let’s start with the excellent insight contained in a Reuters article today about one of the centerpieces of NAFTA reform identified by the administration – the rules of origin (ROO) for autos and other light-duty passenger vehicles. These treaty provisions have been rightly targeted by Team Trump negotiators from the standpoint of U.S. interests because motor vehicles and parts comprise such a large percentage of the goods exchanged throughout North America, and because since NAFTA went into effect, contrary to its supporters’ promises, the American automotive sector has become less, not more globally competitive.

The NAFTA ROO are ostensibly aimed at encouraging automotive manufacturing inside North America and currently require that 62.5 percent of a vehicle’s value come from within the free trade zone in order to be exempted from tariffs. The administration’s response is widely described as a toughening of these rules because it would raise this threshold to 75 percent.

But there’s always been one huge catch that I’ve been tweeting about consistently: Unless the tariff penalty imposed on vehicle and parts-makers outside North America is greatly increased, boosting the duty-free content threshold will have little impact on these companies’ production and employment decisions. The reason? The current NAFTA external tariff on these products is only 2.5 percent. (Just FYI, this point was first made during the original NAFTA debate, in this Economic Strategy Institute study to which I contributed modestly.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tags

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 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.

Those Stubborn Facts: No NAFTA Workers’ Paradise for Mexico

Tags

emerging markets, Mexico, NAFTA, North American Free Frade Agreement, OECD, Organization for Economic Cooperation and Development, Those Stubborn Facts, Trade, wages

Median Real Monthly Earnings Growth of Workers in Developing Country Members of the OECD, 2000 & 2015

China:                         15.3%*                   6.9%

India:                            5.7%***               1.0% (a)

Russia                           0.9%                    -9.5%

Turkey (d)                    1.7%                      5.6%

South Africa*              1.2%                      2.2%

Brazil:                         -1.3%                      2.7%

Indonesia:                    9.8%**                 -0.4%

Saudi Arabia (b)         6.1%                       5.2% (c)

Mexico:                        6.9%                       0.5%

*2001 figure

**2002 figure

***2007 figure

(a) 2012 figure

(b) 2010 figure

(c) 2015 figure

(d) 2004 figure

(Source: “Wage growth by region – ILO modeled estimates, Dec. 2016,” International Labor Organization. Link to ILO Global Wage Database available at “Data collection on wages and income,” International Labor Organization, http://www.ilo.org/travail/areasofwork/wages-and-income/WCMS_142568/lang—en/index.htm. HT to “The U.S.-Mexico Wage Gap Is Actually Widening Under NAFTA,” by Eric Martin and Nacha Cattan, Bloomberg.com, https://www.bloomberg.com/news/articles/2017-11-28/nafta-s-ugly-reality-u-s-mexico-wage-gap-is-actually-widening)

(What’s Left of) Our Economy: September Trade Figures Show Continuing Asia and NAFTA Challenges

Tags

Canada, China, exports, imports, Japan, Made in Washington trade deficit, Mexico, NAFTA, North American Free Trade Agreement, North Korea, recession, recovery, South Korea, Trade, Trade Deficits, Trump, {What's Left of) Our Economy

Since it’s not the usual same-day report, here are the highlights of Friday’s Census Bureau September U.S. trade report in a slightly different than usual format.  And there were lots of highlights, especially for those following President Trump’s current trip to Asia and his continuing efforts to renegotiate the North American Free Trade Agreement (NAFTA).   

September’s combined U.S. goods and services trade deficit increased modestly month-to-month, by 1.70 percent from an upwardly revised $42.77 billion to $43.50 billion. Though the total was the year’s second lowest (just behind August’s), it brought the overall shortfall year-to-date 9.30 percent above last year’s nine-month level. Yet arguably its most noteworthy details concern economies identified by the Trump administration as troublesome U.S. trade partners.

In particular, as the president begins his trip to Asia, the new trade figures showed that the chronic American goods shortfall with the region fell 6.71 percent sequentially, from $44.48 billion to $41.49 billion. Merchandise exports to the Census Bureau’s Pacific Rim country grouping (which does not include Western Hemisphere economies) rose 4.90 percent on month, from $32.27 billion to $33.85 billion. Goods imports, however, fell by 1.83 percent, from August’s record $76.76 billion to $73.35 billion (still the third highest total ever).

On a year-to-date basis, the goods trade gap with the Pacific Rim is up by 2.03 percent.

The new trade figures remind that Mr. Trump’s goal of reducing American trade deficits with NAFTA signatories Canada and Mexico will be a tall order.

The combined NAFTA merchandise deficit actually plunged by 14.63 percent month-to-month, from $6.97 billion to $5.95 billion. The total was the second lowest of the year – nosing out July’s $5.99 billion.

U.S. goods exports to its North American neighbors declined by 1.84 percent sequentially, from $45.04 billion to $44.21 billion, while goods imports dropped by 3.56 percent on month, from $52.01 billion to $50.17 billion.

Year-to-date, however, the NAFTA goods deficit is 24.16 percent higher.

Bilateral trade developments within these regional flows also warrant attention.

The massive and chronic U.S. trade deficit with China – which the president hopes will help pressure North Korea to abolish its nuclear weapons program even has he has targeted its predatory trade practices – slipped sequentially in September by 0.73 percent, from $34.89 billion (the highest total of the year) to $34.64 billion (the second highest total).

America’s goods exports to the strongly growing Chinese economy decreased on month by 1.11 percent, from $10.93 billion (the year’s highest total) to $10.80 billion (the second highest total).

U.S. merchandise purchases from China slipped by 0.82 percent on month, from $45.82 billion (the all-time record) to $45.44 billion (the third highest total ever).

Year-to-date, the merchandise deficit with China is up 6.27 percent.

Japan, has expressed special alarm over the dramatic recent improvement of North Korea’s nuclear arsenal, but is also trying to reconstruct the Trans-Pacific Partnership trade deal without the United States. It saw its even longer-standing merchandise surplus with the United States plummet 26.17 percent sequentially in September, from $6.55 billion to $4.84 billion.

U.S. goods exports to Japan grew by 10.41 percent month-to-month in September, from $5.41 billion to just under $5.97 billion – the second highest total of the year after the just over $5.97 billion figure of April.

U.S. goods imports from Japan sank by 9.66 percent sequentially, from $11.96 billion to $10.81 billion.

All the same, on a January-to-September basis, the American merchandise deficit with Japan is 1.32 percent higher than last year’s nine-month total.

South Korea is on the front lines of the Korean peninsula crisis, and President Trump has launched an effort to revamp its 2012 bilateral trade agreement with the United States. Its merchandise trade surplus with the United States fell by 12.25 percent on month in September, from $2.22 billion to $1.95 billion.

U.S. goods sales to South Korea improved sequentially by 2.38 percent, from $3.74 billion to $3.83 billion, while goods imports shrank by 3.06 percent, from $5.96 billion to $5.77 billion.

Year-to-date, the American goods deficit with South Korea is way down: by 24.01 percent. But since the trade deal with the United States went into effect, in March, 2012, it’s up more than 247 percent on a monthly basis.

Within North America, the goods deficit with Mexico was down 7.67 percent on month in September, from $6.18 billion to $5.70 billion.

U.S. goods exports to Mexico – many of which are industrial inputs that return to the United States as final products – fell by 3.75 percent sequentially, from $20.87 billion to $20.09 billion. America’s merchandise imports from Mexico dropped by 4.64 percent, from $27.05 billion to $25.79 billion.

Year-to-date, the U.S. goods deficit with Mexico is up 10.93 percent from the January-to-September period last year.

Trade balances with Canada – which has been a target of several contentious American trade law actions during President Trump’s first year – have been exceptionally volatile lately. The September merchandise deficit with Canada nosedived by 68.77 percent on month – from $794 million to $248 million, the lowest total of the year.

American goods sales to Canada dipped by 0.19 percent sequentially, from $24.17 billion to $24.13 billion, while goods purchases from Canada dropped by 2.38 percent, from $24.97 billion to $24.37 billion.

Year-to-date, though, the merchandise deficit with Canada is up nearly 153 percent.

The September trade figures also reflected the receding impact of this year’s violent hurricane season.

Principally, the U.S. trade deficit in oil, much of whose production and transport infrastructure is located on the Texas and Louisiana Gulf coasts, soared sequentially in August by 61.65 percent in pre-inflation dollars (from $3.02 billion to $4.88 billion), largely because exports fell by 11.54 percent. That monthly export decrease was the biggest since August, 2015’s 12.62 percent.

In September, however, oil exports rebounded on month by 13.59 percent. That was the biggest monthly increase since May, 2016’s 15.47 percent. And the oil deficit shrank by 17.82 percent, to $4.01 billion – the year’s second lowest total after July.

The overall September trade deficit rose even though exports across the board performed well that month.

Total exports hit $196.82 billion – their highest level since December, 2014 ($197.18 billion). The same held for goods exports, whose $130.58 billion was their best total since December, 2014’s $134.19 billion.

Moreover, services exports hit their second straight all-time high ($66.24 billion).

Yet the much larger amount of imports grew fast enough to more than offset these gains.

Total imports hit rose 1.18 percent on month in September – the fastest rate since January’s 2.83 percent. And the $240.31 billion level was the second highest of the year, after January’s $240.47 billion.

Goods imports rose 1.22 percent on month in September – also the fastest rate since January (3.09 percent). And the $195.97 billion total was also the second highest of the year (after January’s $197.07 billion).

The September monthly increase in services imports (0.98 percent) was also the biggest since January (1.05 percent). And the $44.34 billion total was a new all-time high (passing July’s $44.14 billion).

The huge and chronic American manufacturing trade deficit retreated from August’s monthly record of $82.15 billion. But at $79.91 billion, it was more than enough to keep the shortfall running 5.95 percent ahead of last year’s record shortfall.

Similar trends seem to be unfolding in the nation’s high tech goods trade. The volatile monthly deficit in this category jumped by 15 percent on month in September, to $10.34 billion. That was the second highest total of the year (after May’s $9.47 billion).

Year-to-date, the high tech goods shortfall is up 23.64 percent, a rate of increase that would enable it to surpass the full-year record of $98.72 billion, set in 2011.

Nevertheless, the September figures also made clear that trade’s drag on the current U.S. economic recovery – created by the increase in the trade deficit since the end of the last recession – continued decreasing.  As shown in last week’s initial real gross domestic product (real GDP) data, trade’s overall hit to American growth since the recovery began in mid-2009 has fallen from 10.04 percent in the first quarter to 9.24 percent in the second quarter to 8.18 percent in the third quarter (according to the initial read on the latter). That last number translates into $229.2 billion in lost growth after inflation. 

The September trade figures enable the growth hit to be calculated for the increase in the inflation-adjusted Made in Washington trade deficit – i.e., in those trade flows heavily influenced by American trade agreements and related policy decisions. This trade shortfall, which excludes commerce in energy and services, has sliced recovery-era growth by $459.19 billion after inflation, or 16.39 percent. 

As big as that sounds, its smaller proportionately than the cost of the Made in Washington deficit as of the second quarter – 17.30 percent.    

 

Making News: New NAFTA Column on Marketwatch.com – & More!

Tags

Brendan Kirby, Canada, CNBC.com, Crain's Cleveland Business, Lifezette.com, Making News, manufacturing, Marketwatch.com, Mexico, NAFTA. North American Free Trade Agreement, tax reform, think tanks, Trade, Trump

I’m pleased to announce that an op-ed column of mine was published (yesterday afternoon) on Marketwatch.com. The piece explains how the North American Free Trade Agreement (NAFTA) can be rewritten to serve the interests of all three signatory countries (the United States, Canada, and Mexico) by turning the current continental trade zone into a genuine trade bloc.  Click here to read it.

In addition, on October 18, it was great to see Lifezette.com‘s Brendan Kirby spotlight my research and analysis of the mounting intellectual dishonesty and outright corruption at the nation’s major think tanks – and how they regularly hoodwink the media. Here’s the link.

On October 14, Crain’s Cleveland Business featured my views of President Trump’s manufacturing and trade policies – which I said so far have produced some positive and negative surprises.  You can access the article at this link.

On October 12, this Lifezette piece quoted me on Mr. Trump’s emerging NAFTA revamp strategy.

Finally, for now, this October 11 CNBC.com summarized my appearance that day in a segment that I thought would deal with NAFTA and trade, but instead – strangely – wound up focusing on tax reform.

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

(What’s Left of) Our Economy: Flunking the NAFTA Laugh Test

Tags

American Automobile Labeling Act, American Automotive Policy Council, auto parts, autos, Canada, domestic content, GDP, ImpactEcon, Jobs, light trucks, Mexico, Motor & Equipment Manufacturers Association, NAFTA, North American Free Trade Agreement, rules of origin, tariffs, Trade, Trump, {What's Left of) Our Economy

Remember the wonderful David Letterman show feature “Stupid Pet Tricks”? I couldn’t help but think of it while reading various news reports and analyses claiming that the demise of the North American Free Trade Agreement (NAFTA) will bring apocalyptic consequences to three signatory countries: the United States, Canada, and Mexico. But my parents always told me never to use the (needlessly harsh) word “stupid.” So instead, I’ll call them, “Silly NAFTA Studies.” Examining two that have attracted major attention will make clear why.

First, let’s look at findings released in August by a Colorado consulting firm called ImpactEcon, and revised in October, that was mindlessly written up by The New York Times, The Wall Street Journal, CNN.com, The Los Angeles Times, and many other big news organizations. According to this report:

“Overall, the results show that the US’s reversal of NAFTA leads to a decline in real GDP, trade and investment in the US, Canada and Mexico, with most of the losses resulting from Canada and Mexico’s reciprocation. The losses in low skilled employment are most significant, with employment declining by 256,000, 125,000, and 951,000 in the US, Canada and Mexico respectively. Production and specialization of production across the NAFTA region declines, particularly in those sectors with the highest levels of vertical specialization across NAFTA. The motor vehicles and services sectors in all three NAFTA countries decline, along with production of US meat, food, and textiles; Canadian chemicals and metals; and Mexican textiles, wearing apparel, electronics and machinery.”

Sounds awful, right? And especially dumb for President Trump, who won the votes of many American workers without glitzy high tech skills.

But buried here – glossed over in the press accounts – are results that should be screamingly obvious to anyone knowing anything about intra-NAFTA trade balances, the Canadian and Mexican economies, and in particular their heavy dependence on exporting to the United States: Canada and Mexico take much greater growth and employment hits from NAFTA’s termination than does America.

The passage quoted above shows a major gulf between the projected job impacts.  But the differential effects on real growth rates are even greater – and more threatening to Mexico and Canada. (The researchers assume that all three countries return their tariffs to pre-NAFTA levels.)

Real GDP:

U.S.: -0.09 percent

Canada: -0.48 percent

Mexico: -0.88 percent

And keep in mind two other considerations: The Canadian and Mexican economies are much smaller than the U.S.’ So the jobs losses are much more important for them, relatively speaking. Moreover, Mexico is still a developing country with real political stability problems. Growth and employment shocks like this would spell big, and possibly fatal, trouble for its ruling classes.

In fact, the damage to Canada and Mexico is so great that the (closely related) policy conclusions couldn’t be clearer (except to economics reporters). First, America’s NAFTA partners simply can’t afford to retaliate against the United States if the treaty is terminated; and second, as a result, a walk-out by them is wildly improbable unless Washington’s demands are positively draconian.

The second silly study (and related press coverage) comes from the Motor & Equipment Manufacturers Association (MEMA) – the trade association of an industry that has moved massive amounts of production and jobs to Mexico (much of it from the United States), largely to serve the American market, not the Mexican market or third country markets.

So obviously, the group’s findings should be viewed skeptically. Additionally, however, MEMA assumes (along with the ImpactEcon findings and another study – from another offshorers’ organization – the American Automotive Policy Council), that higher NAFTA requirements for origin rules will leave external tariffs low enough to enable auto manufacturers to ignore the standards and keep shipping product with lots of content from outside the hemisphere all around the free trade zone. Worse, without higher enforcement tariffs, the auto industry might also supply American customers to an even greater extent from even lower-cost economies, like those in Asia.

It’s true that the Trump administration hasn’t discussed raising those tariffs to levels that would bite. It’s also true that these moves would violate all three NAFTA countries’ World Trade Organization commitments on bound tariffs, and similar promises they’ve made in their other trade deals. But the folly of preserving that status quo is so clear cut that it’s entirely reasonable to expect a Trump-ian learning curve. And the President does prize his reputation as a disrupter.

Moreover, all he needs to do is look at the situation for sport utility vehicles and other so-called “light trucks.” Since their non-NAFTA U.S. tariff remains at 25 percent, even staunch opponents of a major treaty rewrite conceded that factories will return stateside if this status quo ante comes back. And P.S.: These products are increasingly dominating American passenger vehicle markets.

A second substantive reason for discounting this study concerns the auto parts makers’ claim that “Raising the automotive content thresholds and forcing automakers to verify the North American origin of more electronics and other parts now sourced from Asia would cause some parts manufacturers to forego NAFTA benefits.”

As just mentioned, the second fear is warranted if tariffs for the origin rules stay where they are. But the point about forcing the companies to verify where their inputs come from? Vehicle makers have already required to provide exactly this information for NAFTA’s entire life by the American Automobile Labeling Act. And they clearly view NAFTA as a huge success. Many companies in the parts supply chain are much smaller, and detailed reporting could indeed become an unreasonable burden for them. But many parts makers are plenty big enough to assume this responsibility easily (unless they don’t know where they themselves manufacture?). Much more important: The information would greatly aid policymakers and the public in (finally!) evaluating the impact of trade agreements and related policy decisions with a critical mass of precision.