I’ll be taking something for a break for a bit, but how could I let Friday’s January trade figures pass without some analysis? As usual, when they’re reported on the same day, the trade data was completely overshadowed by the jobs data. Since jobs, however, come from underlying economic activity, and the trade numbers show us the flows of American commerce across borders, in today’s proverbial globalized world, they really shouldn’t be playing second fiddle.
On a monthly basis, the overall U.S. goods and services deficit shrank by 8.44 percent, from a downwardly adjusted $45.60 billion to $41.75 billion, which seems encouraging. But as usual recently, all the progress came on the oil front. The petroleum deficit plunged 26.80 percent below December’s level, while the non-oil goods deficit increased by 2.23 percent.
That latter development should be bad news for President Obama and everyone else in favor of granting him sweeping new trade authority as well as supporting the new trade deals he’s been negotiating, for the non-oil goods balance is the trade portion of U.S. trade flows that’s affected heavily by trade agreements and other trade policies.
Let’s do something different, this time around, however. In honor of the start of a trade year marked by the release of the January figures, let’s look at the year-on-year trends they reveal. And they don’t inspire much confidence in American trade diplomacy, either.
Despite improving on a monthly basis, the overall U.S. trade balance worsened from January, 2014 to January, 2015 — by 7.49 percent. Combined goods and services exports dropped by 1.73 percent, but imports were off a bare 0.18 percent. Without the dramatically changing American energy picture, moreover, these numbers would look much worse. The oil deficit plummeted by 43.11 percent year-on-year, but that policy-influenced non-oil goods deficit jumped by 25.99 percent to a new monthly record — $49.96 billion. And making clear that more than just falling oil prices are involved, the inflation-adjusted oil shortfall was down 19.12 percent year-on-year.
The huge U.S. merchandise trade deficit with China dipped on a monthly basis in January, too, but rose by 2.75 percent on year. Strikingly, even though the Chinese economy grew by more than seven percent in 2014, U.S. goods exports to the PRC fell by 7.77 percent from January to January. U.S. goods imports were down, too — but just 0.10 percent.
The year-on-year data also spotlight the impact of currency movements on trade flows — which has become major issue surrounding President Obama’s proposed Trans-Pacific Partnership. Japan’s market is the big non-U.S. prize in the TPP talks, and its yen has weakened dramatically versus the U.S. dollar over the past year. Not surprisingly, its merchandise trade surplus with the United States increased 8.30 percent on year during January. U.S. goods exports to the barely growing Japanese economy dropped by 7.74 percent, but U.S. goods imports nosed up by 0.12 percent.
The Eurozone’s recent weakness is also showing up in trade flows. Those countries’ collective merchandise trade surplus with the United States surged by 10.77 percent from January, 2014 to January, 2015, due to U.S. goods exports to these troubled economies rising by only 1.85 percent but U.S. goods imports increasing by 4.60 percent.
But perhaps the worst news for the president’s trade agenda was delivered by the Korea annual trade figures. The U.S.-Korea trade agreement that went into effect in March, 2012 is described by the president’s aides as the model for the TPP. Yet from January to January, the U.S. goods deficit with Korea positively exploded — by 62.93 percent. In fact, it set a new monthly record to start out 2015. Since the previous January, U.S. merchandise exports to Korea sank by 4.33 percent, but U.S. goods imports soared by 19.34 percent.
Since worsening U.S. trade deficits slow America’s growth, and since the economy’s current growth has disappointed nearly all Americans, the main message sent by the January annual trade trends seems distressingly clear: Many more months like January, and the U.S. recovery, weak as it’s been, may be history.