Throughout the CCP Virus period, I’ve refrained from posting on detailed, industry-by-industry trade figures. My reasoning? Pandemic distortions rendered them all but meaningless in terms of what they revealed about the fundamentals of U.S. trade flows and in particular the competitiveness of domestic manufacturing.
Of course, now it looks reasonable to suggest that the pandemic is ending – or at least that the end might really be in sight this time. So I spent some of my weekend comparing the trade flow details from 2019 (the last full pre-pandemic year) with those of 2021 (the last full data year, and whose figures have just been released). And the results surpised the heck out of me. Because if you look at trade deficits and surpluses and how they’ve changed, the best description seems to be surprisingly little.
To start, let’s check out the twenty sectors of the economy that have racked up the biggest trade surpluses in 2019 and 2021. They’re presented below according to the categories created by the U.S. government’s North American Industry Classification System (NAICS), which has become official Washington’s main system for slicing and dicing the U.S. economy. To the right of the actual dollar figure (in billions), you’ll find its rank for that particular year.
And for data junkies, these groupings are those at NAICS’ sixth level of disaggregation – one I like because in many cases it permits distinguishing between final products and the parts and components that make them up. Since for decades, so much U.S. and global trade today takes place in those inputs (because the manufacturing process has become so fragmented because creating complex worldwide supply chains became a premier business model), this distinction has mattered crucially in understanding trade flows.
civil aircraft & parts: $125.953 1 $79.510 1
natural gas: $21.823 4 $54.923 2
soybeans: $18.493 6 $27.110 3
other special class provns: $24.499 3 $27.019 4
petroleum refinery products: $30.583 2 $26.245 5
waste and scrap: $13.065 7 $21.362 6
plastics meterials and resins: $18.803 5 $18.771 7
corn: $7.620 11 $18.674 8
semiconductor machinery: $1.408 43 $11.971 9
semiconductors/related devices: $5.994 14 $10.326 10
non-anthracite coal/petroleum gas: $9.312 8 $9.250 11
used/second hand merchandise: $8.805 10 $8.604 12
non-poultry meat: $7.364 12 $7.898 13
wheat: $5.898 15 $6.891 14
motor vehicle bodies: $9.201 9 $6.886 15
cotton: $6.225 13 $5.789 16
copper, nickel, lead, zinc: $4.402 18 $5.471 17
tree nuts: $5.096 16 $4.712 18
prepared/preserved poultry: $3.745 20 $4.554 19
misc basic inorganic chemicals: $4.169 19 $4.081 20
Some reshuffling of the order of these biggest trade flow winners has taken place. Most stunningly, semiconductor manufacturing equipment jumped from the industry with the forty third widest trade surplus in 2019 to number nine in 2021. Computer parts was in 17th place in 2019 and fell all the way to 52d place (and out of the Top Twenty) in 2021. And motor vehicle bodies dropped from number nine to number 15. But otherwise, the two lists look remarkably similar. In fact, the seven biggest trade surplus industries of 2019 were also the seven biggest in 2021, though the order changed sllghtly.
What has seen much more major change during this two-year period have been the absolute numbers themselves, and these movements do seem pandemic related, though in different ways. Commodities like natural gas and corn (and to a lesser extent, wheat) appear to have been dramatically affected by inflation.
Trade in semiconductors and the machines that make them clearly reflect the increased importance of the “stay at home economy” – both in terms of leisure and the workplace. (The skyrocketing of the semiconductor machinery surplus, however, is also a reminder of how many of the world’s semiconductors are made outside the United States these days – although the microchip industry has also been decidedly cyclical for many years).
Meanwhile, the nosedive in the aerospace surplus has of course resulted from the woes of Boeing, both because of the CCP Virus-related global slump in air travel, and the company’s own manufacturing and safety problems.
Did this pattern repeat for the twenty sectors that ran the biggest trade deficits in those two years? Here are those lists, with the actual figures again in the billions of dollars:
autos & light duty vehicles: -$126.272 1 -$96.250 1
goods returned from Canada: -$91.240 2 -$96.124 2
broadcast & wireless comms equip: -$72.231 3 -$80.075 3
computers: -$59.443 6 -$79.209 4
crude petroleum: -$62.006 5 -$63.495 5
pharmaceutical preparations: -$62.236 4 -$63.477 6
female cut & sew apparel: -$42.088 7 -$41.028 7
audio & video equipment: -$22.184 12 -$34.349 8
male cut & sew apparel: -$30.889 8 -$29.851 9
misc motor vehicle parts: -$23.242 11 -$29.055 10
dolls, toys & games: -$17.285 14 -$26.789 11
printed circuit assemblies: -$16.709 16 -$26.588 12
iron & steel & ferroalloy: -$16.954 15 -$26.294 13
footwear: -$25.597 10 -$26.037 14
major household appliances: -$14.128 19 -$20.849 15
misc plastics products: -$12.886 20 -$20.566 16
jewelry & silverware: -$3.476 68 -$17.819 17
motor vehicle electrical equip: -$14.418 17 -$16.151 18
curtains & linens: -$12.134 22 -$15.256 19
aircraft engines & engine parts: -$25.670 9 -$14.070 20
The patterns revealed on this list closely resemble those made clear from the Top Twenty surplus list – some reshuffling but – with just a few exceptions like jewelry and silverware, (Home Shopping Network lines burning up?), and aircraft engines and engine parts – little major change. Indeed, the order of the top three hasn’t changed a bit, and as with the biggest trade surplus sectors, the makeup of the top seven is identical (though the order has been slightly modified).
As with the big surplus winners (though on the consumption side, not the production side), the advent of the “stay at home economy” is evident from the large increases in the absolute trade deficits for computers and audio and video equipment (though not so much for the broadcast and wireless gear category, which contains cell phones).
The damage done by the worldwide semiconductor shortage can be seen in the dramatically lower motor vehicle trade deficit. And aerospace woes come through loud and clear from the even steeper drop in the aircraft engines deficit.
Another take on the trade balance figures is provided by examining the sectors where trade balances have improved the most (either because surpluses have expanded or because deficits have shrunk), and worsened the most (either because surpluses have shrunk or deficits expanded). Below are the biggest trade balance “improvers” by percentage change among the sectors that have either run the fifty biggest trade surpluses or the fifty biggest trade deficits. The sectors with “deficit” to the right of the percentage change are those where trade shortfalls declined.
miscellaneous grains: +1,021.72 percent
semiconductor manufacturing equipment: +750.18 percent
Jewelry and silverware: +412.65 percent deficit
sawmill products: +270.45 percent deficit
storage batteries: +168.67 percent deficit
natural gas: +151.67 percent
corn: +145.07 percent
surgical appliances & supplies: +134.60 percent deficit
sporting & athletic goods: +86.13 percent deficit
artificial/synthetic fibers/filaments: +74.73 percent deficit
semiconductors/related devices: +72.28 percent
small electrical appliances: +71.87 percent deficit
waste and scrap: +65.50 percent
animal fats/oils/byproducts : +63.15 percent
motor vehicle steering &suspension & parts: +60.49 percent deficit
misc plastics products: +59.60 percent deficit
printed circuit assemblies: +59.13 percent deficit
cooling, heating, & ventilation equipment: +55.91 percent deficit
dolls, toys, & games: +54.86 percent deficit
audio & video equipment: +54.84 percent deficit
One trend that should jump out right away: Thirteen of the twenty sectors that have improved their trade balances the most are still in deficit – which reflects the nation’s continuing huge trade gap.
Since some of the greatest changes in the order of sectors with the biggest trade deficits and surpluses have come in pandemic-related sectors, it’s not surprising that such industries are prominent on the list of improvers. Hence the appearance of semiconductors and their manufacturing equipment, and commodities like miscellaneous grains, corn, and natural gas.
As for sawmill products, their results owe largely to U.S. lumber tariffs. In sporting and athletic goods, can the deficit’s shrinkage be due to a pandemic-y dropoff in physical activity?
Totally puzzling, though – the improvement in electrical appliances and audio and video equipment, where so much production has migrated overseas in recent decades, and because imports of the latter would seem to have jumped to serve so much of the stay-at-home demand.
But on the encouraging side – the big decrease in the trade deficit in surgical appliances and supplies, which includes all the personal protective equipment (like facemasks, gloves, and medical gowns) that have figured so prominently in the nation’s pandemic response, along with ventilators.
Now the twenty major sectors whose trade balances have worsened the most:
oil & gasfield machinery: +54.65 percent
aircraft engines & engine parts: +45.23 percent deficit
civilian aircraft, engines, & parts: +36.87 percent
railroad rolling stock: +35.04 percent
turbines & turbine generator sets: +33.09 percent
non-diagnostic biological products: +31.84 percent deficit
in-vitro diagnostic substances: +31.10 percent
cyclic crude & other intermediate chemicals: +31.05 percent
guided missiles & space vehicles: +30.07 percent
fibers, yarns, & threads: +29.32 percent
motor vehicle bodies: +25.16 percent
paper bags/coated & treated paper: +23.26 percent
autos & light duty vehicles: +23.78 percent deficit
petroleum refinery products: +14.19 percent
misc animal foods: +10.35 percent
aircraft: +9.98 percent deficit
paints & coatings: +9.07 percent
tree nuts: +7.54 percent
cotton: +7.00 percent
male cut & sew apparel: +3.36 percent deficit
Interestingly, although the nation’s huge and chronic trade deficits means that many more industries run them than surpluses, fifteen of the twenty sectors listed above as leading trade deficit losers are surplus industries. So during the pandemic period so far, their surpluses have shrunk. Moreover, the degree of shrinkage has only been kept relatively low because the surpluses weren’t that big to begin with.
For the aforementioned reasons, the aerospace cluster is well-represented among the big deficit losers. But it’s strange that, during the pandemic so far, the U.S. trade shortfall in the non-diagnostic biologic products category that contains vaccines has gone way up.
Overall, however, the weaker export performance even among big U.S. net export winners points to the global economic slump that’s been created by the CCP Virus and the curbs on business and personal activity it’s spawned – which have combined to drag down growth abroad, in U.S. export markets, more than at home. But the remarkably stable makeup of U.S. surpluses and deficits strongly suggests that any new post-virus normal in American trade will strongly resemble the old one.