New Records with China and Manufacturing Boost October Trade Deficit
Friday, December 14, 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 4.87 percent in October, boosted largely by new record monthly trade gaps with China and in manufacturing. The $42.24 billion monthly figure, released December 11 by the Census Bureau, also resulted from a 45.29 percent jump in the U.S. trade deficit with Japan, a 24.36 percent increase in the shortfall with new trade partner Korea, and a 40.64 percent surge in the global U.S. high tech goods deficit.
The new all-time highs for the overall manufacturing deficit and the manufacturing-dominated China goods deficit reveal three painful truths about the U.S. economy. First, it still suffers major competitiveness problems. Second, a domestic manufacturing renaissance remains a distant and possibly receding goal. Third, the nation remains painfully far from President Obama’s goal of “an economy built to last.” Without major changes in U.S. trade and manufacturing policies, further backsliding will be inevitable, and the nation’s current economic woes will be prolonged.
At the same time, despite the deficit’s increase, weakening U.S. growth has now pushed the combined goods and services trade gap down 1.48 percent on a year-to-date basis – from $459.30 billion to $452.52 billion. Overall U.S. exports
are up 4.57 percent so far this year, but imports are only 3.26 percent greater. A major factor limiting import growth this year – a 3.18 percent drop in America’s foreign oil purchases. Non-oil goods imports are up 5.34 percent through the first ten months of 2012
The China merchandise trade
deficit increased from $29.06 billion to $29.47 billion in October (1.41 percent). This total exceeded the previous record of $29.38 billion, set in July, by 0.30 percent. U.S. goods exports to the People’s Republic improved by 23.11 percent, from $8.79 billion to $10.82 billion – a new all-time high that eclipsed the old December, 2010 record by 6.92 percent. But the much larger amount of goods imports also hit a new record, increasing by 6.45 percent, from $37.85 billion to $40.29 billion. That figure topped the previous peak of $37.93 billion, set in July, by 6.22 percent.
The China merchandise trade deficit currently is running 2.50 percent ahead of last year’s all-time high of $295.42 billion.
The equally chronic trade deficit in manufacturing totaled $65.34 billion – an all-time high and also the second new monthly record in four months. October’s manufactures imports of $151.28 billion topped the previous record of $147.09 billion, set in August, by 2.85 percent. But October industrial exports of $85.95 billion were 8.24 percent below the monthly record of $93.67 billion set in March.
On a year-to-date basis, the manufacturing deficit is running 7.43 percent of last year’s record $639.79 billion level.
The U.S. merchandise trade deficit with Japan soared from $4.82 billion to $7.00 billion, as U.S. goods exports sank from 8.00 percent (from $6.17 billion to $5.68 billion) while imports increased by 15.35 percent (from $10.99 billion to $12.68 billion). So far, the January-through-October Japan deficit ($64.40 billion) is already higher than 2011’s full-year total of $63.22 billion. This deficit, moreover, is running 28.32 percent ahead of last year’s rate.
The merchandise deficit with Korea, with which a new free trade
agreement (KORUS) went into effect in March, grew from $1.29 billion to $1.60 billion in October. U.S. goods exports to Korea edged up 1.14 percent (from $3.42 billion to $3.46 billion) but U.S. merchandise imports rose by 7.49 percent (from $4.71 billion to $5.60 billion).
Since KORUS’ implementation, the U.S. monthly merchandise deficit with Korea has risen from $0.55 billion, a near tripling. U.S. goods exports have decreased from $4.23 billion, a fall of 18.20 percent. And U.S. merchandise imports are up from $4.78 billion, a rise of 17.15 percent.
Through the first ten months of this year, the U.S. merchandise deficit with Korea of $13.64 billion is already greater than 2011’s full year total of $13.25 billion. In fact, the 2012 shortfall is running 19.65 percent ahead of last year’s rate.
The longstanding but volatile U.S. trade shortfall in high tech products shot up by 40.64 percent in October, from $7.16 billion to $10.06 billion. U.S. high tech exports rose by 1.16 percent from $25.76 billion to $26.06 billion, while U.S. imports increased by 9.64 percent, from $32.91 billion to $36.12 billion.
On an annualized basis, though, the high tech deficit of $74.40 billion is down 8.10 percent from last year’s January-October total of $80.96 billion. Year-to-date exports have risen by 6.35 percent, but imports have increased by only 2.66 percent. The full-year high tech deficit set a record of $99.61 billion in 2011.
The increase in the overall goods and services deficit in October in part reflected an unusually large downward revision (3.06 percent) in the September shortfall, from $41.55 billion to $40.28 billion. Monthly U.S. exports declined by 3.64 percent in October, to $180.52 billion – the lowest such total since February. Monthly overall imports decreased by 2.13 percent, to $222.75 billion – the lowest total since April, 2011.
Within the goods sector, the monthly oil deficit rose by 14.09 percent, but the non-oil shortfall shrank by 3.98 percent. On a year-to-date basis, however, the oil deficit is down 7.63 percent, but the larger non-oil goods deficit is up 8.02 percent.
Among America’s other trade competitors, the U.S. merchandise deficit with the troubled Eurozone increased 16.29 percent in October, as imports rose faster than exports. The deficit with Canada dipped by 0.21 percent, as exports grew slightly faster than imports, and the deficit with Mexico dropped by 8.44 percent, as exports grew considerably faster than imports.
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).