The Trade Deficit Remains America’s Growth Leader
The following originally appeared on American Economic Alert.
Trade Year 2012 began with both a sharp 4.24 percent increase in the U.S. trade deficit in January and a hefty 3.32 percent upward revision in the December, 2011 deficit.
The $52.57 billion overall January shortfall was America’s highest such monthly total since the October, 2008 peak of the global financial crisis, in the immediate aftermath of the Lehman Brothers collapse. Overall U.S. imports set a new record, while the export total was the second highest in American history.
The January rise in the combined goods and services trade shortfall was led by jumps in the deficits for oil, manufactures, and merchandise trade with China – where the 12.45 percent rebound contrasted glaringly with a decline in American bilateral deficits with most other major trade competitors.
These increases make clear that the U.S. economy remains incapable of generating even modest growth without amassing more debt. Although President Obama rightly seeks to create “an economy built to last” in America, the deficit’s relentless increase despite a sluggish-at-best economic recovery reveals that the United States is still an economy built to borrow.
In addition, the bounce back in the China deficit, keyed by a 13.75 percent nosedive in U.S. goods exports, makes clear that the President’s timid efforts to counter Beiiing’s predatory trade practices have failed. And the House Republican leadership’s refusal to allow a vote on the Senate-passed bipartisan currency manipulation bill makes Speaker Boehner thoroughly complicit.
With U.S. goods imports from China growing by a solid 4.75 percent in January, the trade deficit with the PRC rose to 49.50 percent of the combined U.S. goods and services deficit, up from 45.89 percent in December.
The chronic U.S. oil deficit surged by 9.23 percent in January, from $27.20 billion to $29.71 billion, as oil imports increased by 3.30 percent, from $37.84 billion to $39.09 billion.
But the manufacturing deficit widened by a strong 8.60 percent as well, from $51.06 billion to $55.45 billion. U.S. manufactures exports sank by 7.03 percent, from $82.98 billion to $77.15 billion. But the much larger amount of manufactures imports dipped only 1.07 percent, from $134.04 billion to $132.60 billion.
On a January-January basis, manufactures exports are up 9.02 percent, manufactures imports are 9.88 percent higher, and the manufacturing trade deficit has swelled by 11.10 percent.
Volatile U.S. high tech goods trade represented an unusual bright spot in the January trade report, as the deficit fell by 15.43 percent. U.S. exports and imports of these products dropped by more than 14 percent during the month, and the year-on-year deficit is now down 5.20 percent.
The rise in the overall trade deficit in January reflected a 1.45 percent increase in goods and services exports (from a downwardly revised $178.23 billion to $180.81 billion) and a 2.02 percent increase in overall imports (from an upwardly revised $228.65 billion to $233.37 billion).
The U.S. goods trade deficit increased by 3.75 percent in January, from an upwardly revised $65.04 billion to $67.48 billion. Goods exports were up 1.47 percent (from a downwardly revised $126.72 billion to $128.58 billion). But goods imports were 2.24 percent higher (from an upwardly revised $191.76 billion to $196.06 billion.
On a relative basis, the biggest revision in the recent trade figures came in the longstanding services surplus. Although the December figure was pegged originally at $15.50 billion, it was revised downward by a dramatic 5.68 percent, to $14.62 billion. January’s total came in 2.05 percent higher, at $14.92 billion.
America’s goods trade deficit with Canada, its largest trade partner, soared by 23.71 percent in January, to $4.80 billion, as U.S. goods exports fell by just over three percent and U.S. goods imports inched up by just under one percent.
But the U.S. goods deficits with other major competitors all fell, most notably with Mexico and the economically troubled Eurozone.
The Mexico gap plummeted by 14.34 percent, as U.S. merchandise exports to its southern neighbor rose more than five times faster than its goods imports. And the Eurozone goods trade deficit tumbled 10.68 percent as exports to and imports from these 17 countries fell by eight and 8.92 percent, respectively.