May Trade Deficit Falls; Good News Ends There

http://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf

The above link will take you to the U.S. Bureau of Economic Analysis release of the May, 2009 foreign trade data.

In May, the U.S. trade deficit declined from -$28.8 billion in April to -$26.0 billion.  That’s the good news.  Any decline in the U.S. trade deficit, for whatever reason, is good news.  It slows the rate at which the U.S. has to sell off assets to finance the trade deficit. 

But that’s where the good news ends.  The decline in imports is due to the recession, not to any shift in preference for American-made products.  People are simply buying less because they have less to spend and fear that conditions in the economy are getting worse.  Consider that the annual sales rate for vehicles remains stuck at about 9 million per year, vs. pre-recession levels of 17 million per year.  That means about 4 million fewer imported cars per year, accounting for a decline in imports of about $8 billion per month. 

But it was a rise in exports that drew most of the focus on this report, with some claiming it was a hopeful sign for U.S. manufacturers.  The people saying that obviously didn’t look at this report in depth.  Most of the gain in exports was in the category of “industrial supplies and materials.”  Sounds good, until you realize that most of the gain in that category was petroleum exports – an anomaly.   If the increase in exports in May was a hopeful sign for U.S. manufacturing, then why did the manufacturing sector shed another 136,000 jobs in June? 

Others point to the falling dollar as reason for hope for a rebound in U.S. manufacturing.  Yes, it may help a little, but very little, because the trade deficit in manufactured products is driven by population disparities between the U.S. and some of our trading partners, and not by currency valuations.

As an example, consider the Japanese yen which, over the last few decades, has risen by over 300% vs. the dollar.  But instead of falling, our trade deficit with Japan has soared during that time.  More recently, the Chinese yuan has appreciated over 20% vs. the dollar, but the results have been the same – our trade deficit with China has only worsened. 

Even more recently, the dollar has dropped even further against the Japanese yen.  But has anyone seen any increase in prices for Japanese products?  Of course not!  In fact, Toyota recently cut the price for its Prius model.  Nations dependent on exports to sustain their bloated labor forces aren’t going to let currency valuations erode their U.S. market share.  They understand that the price of taking a loss on exported products is far less than the social cost of sky-high unemployment.  If only U.S. leaders had a similar appreciation. 

Nothing has changed to fundamentally alter the forces driving the U.S. trade deficit.  Either the U.S. economy will remain in recession, holding down the trade deficit (but not reducing it further), or we will experience a defict spending-fed recovery of sorts which will surely send the trade deficit soaring once again.  But employment in the U.S. will never really recover unless the U.S. takes positive action – either imposing tariffs on imports or getting our trade partners to agree to import quotas – to bring manufacturing jobs back to the U.S.

Advertisements

One Response to May Trade Deficit Falls; Good News Ends There

  1. Mark A. Hall says:

    FAIR & BALANCED TRADE………..

    THE ONLY NO DEPOSIT (Stimulus Funds or Tax Cuts) REQUIRED SOLUTION:

    The cumulative May 2009 YTD trade information reflects that total U.S. non-energy exports as a percentage of total U.S. non-energy imports was 79.14%.

    Although this is our best performance for this measurement since 1997, there are still many PROBLEM CHILDREN that will PREVENT our chance at recovery and return to prosperity UNLESS DELT WITH PROPERLY (Fair & Balanced Trade).

    OUR LIST OF PROBLEM CHILDREN INCLUDES THE FOLLOWING:

    CHINA:

    May 2009 YTD U.S. Non-Energy Exports to China = $24.64 Billion
    May 2009 YTD U.S. Non-Energy Imports from China = $109.35 Billion
    May 2009 YTD U.S. Ratio with China = 22.53%

    VIETNAM:

    May 2009 YTD U.S. Non-Energy Exports to Vietnam = $1.11 Billion
    May 2009 YTD U.S. Non-Energy Imports from Vietnam = $4.46 Billion
    May 2009 YTD U.S. Ratio with Vietnam = 24.89%

    IRELAND:

    May 2009 YTD U.S. Non-Energy Exports to Ireland = $3.46 Billion
    May 2009 YTD U.S. Non-Energy Imports from Ireland = $12.36 Billion
    May 2009 YTD U.S. Ratio with Ireland = 27.99%

    THAILAND:

    May 2009 YTD U.S. Non-Energy Exports to Thailand = $2.49 Billion
    May 2009 YTD U.S. Non-Energy Imports from Thailand = $6.90 Billion
    May 2009 YTD U.S. Ratio with Thailand = 36.09%

    INDONESIA:

    May 2009 YTD U.S. Non-Energy Exports to Indonesia = $1.88 Billion
    May 2009 YTD U.S. Non-Energy Imports from Indonesia = $5.01 Billion
    May 2009 YTD U.S. Ratio with Indonesia = 37.52%

    ITALY:

    May 2009 YTD U.S. Non-Energy Exports to Italy = $4.69 Billion
    May 2009 YTD U.S. Non-Energy Imports from Italy = $10.03 Billion
    May 2009 YTD U.S. Ratio with Italy = 46.76%

    TAIWAN:

    May 2009 YTD U.S. Non-Energy Exports to Taiwan = $5.95 Billion
    May 2009 YTD U.S. Non-Energy Imports from Taiwan = $11.02 Billion
    May 2009 YTD U.S. Ratio with Taiwan = 53.99%

    JAPAN:

    May 2009 YTD U.S. Non-Energy Exports to Japan = $20.43 Billion
    May 2009 YTD U.S. Non-Energy Imports from Japan = $34.87 Billion
    May 2009 YTD U.S. Ratio with Japan = 58.59%

    SOUTH KOREA:

    May 2009 YTD U.S. Non-Energy Exports to S. Korea = $9.87 Billion
    May 2009 YTD U.S. Non-Energy Imports from S. Korea = $15.55 Billion
    May 2009 YTD U.S. Ration with South Korea = 63.47%

    GERMANY:

    May 2009 YTD U.S. Non-Energy Exports to Germany = $17.88 Billion
    May 2009 YTD U.S. Non-Energy Imports from Germany = $26.92 Billion
    May 2009 YTD U.S. Ratio with Germany = 66.42%

    ONLY with the imposition of IMMEDIATE and EFFECTIVE import/export quotas and/or tariffs will we FINALLY set the stage for a prosperous and long lasting recovery.

    Thanks,

    Mark A. Hall

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: