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Current Trade Deficit:    
U.S. Trade Deficit Soars, Led by China, Manufacturing, and High-Tech Goods
Alan Tonelson
Thursday, March 10, 2011
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Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).
WASHINGTON, D.C., March 10 – As Congress mulled a series of new trade deals, a jump in the January trade deficit provided new evidence Washington has not yet learned how to expand trade without ballooning the U.S. deficit – thereby worsening America’s already dangerously high levels of debt and further slowing an already sluggish recovery.

Said U.S. Business and Industry Council Research Fellow Alan Tonelson, “The January trade deficit surge, coming on top of a 32-plus percent rise in last year’s deficit, is telling Congress loudly and clearly to figure out how to do trade policy right before plunging ahead with new agreements.

Step One needs to be solving our trade crisis with a China that remains highly protectionist despite years of U.S. pleadings.”

Added Tonelson, “These trade numbers are sending an even louder message to the new Tea Party-oriented legislators who just endorsed passing the Korea, Colombia, and Panama trade deals. They can forget about repairing the nation’s broken finances if they want to resume speeding down a trade policy road that’s a proven debt creator.”

Spurring the deficit’s rise were dramatically higher U.S. trade gaps with China, and in the crucial manufacturing and high tech sectors. All dwarfed the increase in America’s oil trade deficit.

The soaring goods trade deficit with China was especially disturbing. The 12.52 percent increase, from $20.68 billion in December to $23.27 billion, was keyed by a huge 20.16 percent nosedive in U.S. goods exports to the rapidly growing Chinese economy – from $10.12 billion to $8.08 billion. U.S. goods imports from China rose, but only by 1.79 percent, from $30.80 billion to $31.35 billion.

Domestic manufacturing’s January trade performance was even worse. The deficit increased by 13.47 percent, from $49.38 billion to $56.03 billion. Industrial exports sank by 5.79 percent in January, from $117.01 billion to $110.24 billion, dealing a blow to President Obama’s goal of creating high-wage jobs by promoting U.S. overseas sales. Manufacturing imports remained virtually unchanged, dipping only from $166.39 billion to $166.27 billion.

But the most dismal January performance was recorded by America’s high tech goods deficit, which jumped by 29.26 percent, from $5.50 billion to $7.11 billion. High tech goods exports plunged by 18.94 percent, while high tech goods imports declined by a much lower 10.54 percent.

All these surging trade deficits dwarfed the 4.71 percent increase in the oil gap in January, from $25.46 billion in December to $26.66 billion. Indeed, the overall non-petroleum goods deficit skyrocketed by 18.55 percent in January.

The overall goods and services deficit rose 15.10 percent in January, from a downwardly revised figure of $40.26 billion to $46.34 billion. The overall goods deficit increased 11.41 percent and the much smaller services surplus inched up 0.30 percent.

Overall exports increased by 2.72 percent, from $163.30 billion to $167.74 billion. And goods exports increased by 3.42 percent, from $116.54 billion to $120.50 billion. But overall imports increased by 5.17 percent, from $203.56 billion to $214.08 billion. And goods imports soared by 5.94 percent, from $180.25 billion to $170.14 billion.

The rise in the China goods deficit in January contrasted with a 15.58 percent decline in the goods deficit with Japan, a 4.91 percent drop in the goods deficit with Canada, and a 0.61 percent dip in the goods gap with the Euro area. The U.S. goods deficit with Mexico increased by 4.48 percent.


Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).