US Slowdown Fails to Stop Trade Deficit Surge
Thursday, October 11, 2012
|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).|
The U.S. trade deficit rose by more than four percent in September despite the American economy’s slowdown. The trade shortfall’s increase – which came on top of an upwardly revised July figure – practically ensures that trade flows will slow an already feeble U.S. recovery even further during the third quarter.
The trade gap’s worsening was spearheaded by an 11.64 percent jump in the nation’s chronic oil deficit, from $21.04 billion to $23.49 billion. Oil imports increased by 5.25 percent, from $30.90 billion to $32.52 billion. The non-oil goods deficit decreased by 2.70 percent, from $36.27 billion to $35.29 billion. Oil imports rose 5.25 percent in August, while their non-oil goods counterparts dropped by 1.48 percent.
America’s equally chronic deficits on the critical manufacturing, high tech goods, and China fronts narrowed as well, though they still remained at historically high levels in the face of slowing domestic growth.
The message to policymakers couldn't be clearer: As the recovery struggles and recession odds rise, America’s trade deficits keep draining precious growth and hiring opportunities from the economy. Yet neither Washington nor the presidential campaigns has offered realistic strategies for jumpstarting growth by reducing these deficits.
The U.S. manufacturing trade deficit dropped 4.60 percent from July’s record $63.93 billion total, but still approached $61 billion, the third highest monthly total in U.S. history. Manufactures exports
increased by 6.38 percent in August, but the much greater amount of exports rose 1.53 percent. On a year-through-August basis, the manufacturing trade deficit is up 7.67 percent, as 7.17 percent import growth has outstripped 6.84 percent export growth.
The manufacturing-dominated merchandise deficit with China dipped 2.35 percent in August, from $29.38 billion to $28.69 billion. U.S. goods exports to the PRC edged up a bare 0.70 percent, to $8.61 billion, while imports declined 1.66 percent, to $37.30 billion. On a year-on-year basis, the merchandise trade
deficit with China is running 7.30 percent ahead of 2011’s record total.
Better news came from American high tech products industries, where the volatile deficit sank fully 17.32 percent in August. U.S. high tech goods exports improved by 2.90 percent, to $25.54 billion, and imports fell 2.09 percent, to $32.27 billion. Through August, the high tech deficit is down 7.83 percent from last year’s levels, but remains 22 percent higher than 2010’s.
Although the Eurozone’s economic troubles keep growing, the U.S. merchandise deficit with the troubled region fell 4.61 percent in August, from $10.19 billion to $9.72 billion. U.S. goods exports actually increased by 5.97 percent and imports rose by only 1.63 percent.
U.S. total exports' 1.04 percent August drop-off -- from a downwardly revised $183.19 billion to $181.28 billion -- represented the third straight month of decline. Overall U.S. imports decreased by a negligible 0.07 percent, from an upwardly revised $225.65 billion to $225.50 billion.
America’s merchandise trade deficits in August decreased with most major trade competitors except oil-rich Canada, where the shortfall widened by 12.92 percent. The U.S. merchandise deficit with new free-trade partner Korea sank by 15.79 percent after surging in July. On a year-on-year basis, however, that deficit is running 24.71 percent ahead of 2011’s totals.
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).