In August, the combined U.S. goods and services trade deficit declined by 2.67 percent sequentially to hit $42.40 billion – its lowest monthly level since September, 2016’s $38.47 billion. The improvement came even though several typical major engines of trade deficit growth worsened.
A new record was set for the chronic and huge manufacturing trade deficit, with its $82.15 billion August total topping the previous high (last November’s $80.75 billion) by 1.73 percent. The manufacturing-heavy China goods gap, meanwhile, grew to its highest monthly level ($34.89 billion) since September, 2015 ($36.29 billion). And the pre-inflation oil trade deficit, which has decreased dramatically in recent years, staged its strongest monthly rebound (jumping by 60.59 percent) since June, 2016 (60.84 percent). Pointing to a hurricane effect: the biggest monthly drop in current dollar oil exports (11.53 percent) since August, 2015 (12.62 percent).
Boosting the August trade performance was the new all-time high hit for services exports ($66.11 billion), the best overall monthly exports figure ($195.32 billion) since December, 2014 ($197.18 billion), and the best monthly goods exports reading ($129.21 billion) since April, 2015 ($129.72 billion). America’s goods trade deficits with Mexico and South Korea, both of which have been criticized by President Trump, increased sequentially in August (by 25.49 percent and 15.20 percent). And the longstanding Japan merchandise deficit grew by 13.49 percent on month.
But merchandise trade shortfall with Trump trade target Canada plummeted by 61.43 percent month-to-month, and the goods gap with the European Union fell by 7.92 percent. The latest figures on the growth-slowing impact of the Made in Washington trade deficit show that it’s weakened slightly (from slowing the U.S. economic recovery by 17.40 percent as of the first quarter of this year to cutting inflation-adjusted growth by 17.30 percent in the second quarter). The new August trade figures indicate that it might decline modestly again once third quarter GDP and September trade data are released.
Here are selected highlights of the latest monthly (August) trade balance figures released this morning by the Census Bureau:
>America’s combined goods and services trade deficit declined by 2.67 percent on month in August to its lowest level ($42.40 billion) since September, 2016 ($38.47 billion), as a new monthly record manufacturing trade shortfall and poor China and hurricane-related oil results were more than offset by strong export performances, including a new all-time high for services exports.
>The August manufacturing trade deficit of $82.15 billion was 1.73 percent greater than the previous record total of $80.75 billion, set last November.
>August manufacturing exports grew by a solid 6.82 percent on month, to $93.51 billion. But the far larger amount of imports rose by 5.07 percent, to $175.67 billion.
>Year-to-date, the manufacturing trade deficit is running 5.56 percent ahead of last year’s record pace. Manufacturing exports for the January-August period are up 4.04 percent, and imports have increased nearly as fast – 4.72 percent.
>Fueling these manufacturing trade results in August was a 3.99 percent month-to-month widening of America’s manufacturing-heavy trade deficit with China. The $34.89 billion total was the largest monthly figure since September, 2015’s $36.29 billion.
>U.S. goods exports to China improved sequentially in August by an impressive 8.75 percent, but merchandise imports, which are much greater, increased by 5.08 percent.
>Year-to-date, the merchandise deficit with China is 6.24 percent higher than last year’s total – which was the second largest annual figure ever.
>The pre-inflation U.S. oil trade deficit, which has nosedived in recent years thanks to the energy production revolution, rose in August from $3.02 billion to $4.85 billion. That 60.59 percent monthly increase was the biggest such rise since the 60.84 percent surge registered in June, 2016.
>Pointing to the effects of this year’s violent hurricane season, oil exports in August recorded their biggest monthly decrease (11.53 percent) since August, 2015 (12.62 percent).
>On a year-to-date basis, however despite the longer-term improvement, this oil shortfall is outpacing last year’s by a stunning 36.01 percent.
>The hurricane impact on oil was also suggested by the excellent export data produced by other major sectors of the economy.
>Services set a new overseas sales record in August, and reached their second all-time monthly high in the last three months. August’s $66.11 billion bested June’s $65.90 billion by 0.33 percent.
>Total U.S. exports improved by 0.42 percent, to $195.32 billion, and thereby hit their highest level since December, 2014’s $197.18 billion.
>Goods exports rose even faster sequentially in August, by 0.44 percent to $129.21 billion. The result was their strongest month since April, 2015 ($129.72 billion).
>Having set reform of the North American Free Trade Agreement (NAFTA) as a priority, President Trump no doubt noticed that the U.S. merchandise trade deficit with Mexico surged by 25.49 percent on month in August, to $6.18 billion. U.S. goods exports to Mexico were 5.73 percent higher in August than in July, but import growth was 9.68 percent.
>The year-to-date merchandise deficit with Mexico is so far 11.72 percent higher than in the first eight months of 2016.
>America’s merchandise trade deficit with South Korea, which has just this week agreed to substantive talks on modifying its bilateral trade deal with the United States, increased by 15.20 percent sequentially in August, to $2.22 billion.
>U.S. goods exports to South Korea actually sank by 8.21 percent on month – the biggest such decrease since January’s 21.51 percent. America’s merchandise imports from South Korea fell, too, and for the second straight month – but by only 0.70 percent.
>America’s merchandise trade deficit with South Korea is down so far this year by fully 28.07 percent on a year-to-date basis. But since the bilateral trade deal went into effect, in March, 2012, it’s nearly tripled.
>The U.S. merchandise trade deficit with Japan increased notably (13.49 percent) as well on month in August, to $6.55 billion.
>America’s goods exports to the world’s third biggest single national economy decreased by 5.52 percent month-to-month, while its goods imports rose by 4.02 percent.
>Year-to-date, this merchandise deficit with Japan is running 12.54 percent ahead of last year’s level.
>Better news came in merchandise trade with America’s other NAFTA partner, Canada. The U.S. deficit – which has been volatile recently – plummeted by 61.43 percent in August, to just $410 million.
>American goods exports to Canada improved by 12.50 percent. Imports climbed, too, but by only 9.06 percent.
>Year-to-date, though, the U.S. merchandise trade shortfall with Canada is running nearly three times ahead of last year’s rate.
>Improvement in August was also seen in American merchandise trade with the European Union (EU) – the world’s largest economic unit. On a monthly basis, the U.S. deficit narrowed in August by 7.92 percent, to $12.39 billion.
>U.S. goods exports to the EU advanced by 9.08 percent on month, while imports were up only 2.52 percent.
>Year-to-date, moreover, the American merchandise deficit with the EU is running 0.72 percent behind last year’s rate.
>The latest data for the growth drag on the still weak U.S. economic recovery of rising trade deficits are only from the second quarter. But by both major measures, they show that trade’s bite into the expansion is easing, but remains deep.
>Since the recovery began, in mid-2009, to the end of the second quarter of this year, the increase in the trade deficit has reduced cumulative after-inflation output during the expansion by 9.24 percent, or $247.30 billion. That’s down from the 10.04 percent, and $255.9 billion, as of the first quarter.
>The toll on the expansion attributable to U.S. trade policy is diminishing, too, but has been much higher. This Made in Washington deficit strips out of inflation-adjusted American trade flows energy and services – two sectors where trade policy and related decisions have had only marginal effects so far. The remainder of U.S. trade flows – of goods except oil – are heavily influenced by policy.
>Since the recovery’s onset, the rise of this Made in Washington deficit has cost the recovery $462.8 billion in lost growth in absolute terms – or 17.30 percent of the cumulative total. That’s down from a growth bite of 17.40 percent worth ($443.3 billion in absolute terms) for the first quarter.