The U.S. Bureau of Economic Analysis released international trade results for the month of January this morning. The trade deficit fell by approximately $2.3 billion, driven by a $0.9 billion decline in oil imports and a $2.4 billion decline in non-petroleum goods imports. But the latter was offset by a $1.0 billion decline in non-petroleum goods exports. Otherwise, there wasn’t much noteworthy in the report. Just another blip in the steady growth in the trade deficit since bottoming out early in 2009.
In January, President Obama set a goal of doubling exports in five years in an effort to breathe life back into the manufacturing sector of the economy, and I vowed to track his progress on this goal. Although January is the starting point, the drop in exports is an ominous sign.
The following is the chart I’ve started, showing imports and exports, as well as the trajectory that exports need to follow to meet Obama’s goal.
It’s not that I’m hoping he’ll fail in this endeavor. I’d love to see him succeed. But I know that he can’t because exports are not within his control. Exports are 100% dependent on orders from overseas customers. Sure, he can enact policies to provide tax breaks to manufacturers, but that may improve their cost position by a percent or two. In the meantime, foreign competitors will easily match those meager cost reductions and no progress will be made.
The real goal is to reduce the trade deficit. Obama thinks he can export his way out of it, pushing American-made products into a world glutted with manufacturing capacity. He doesn’t understand the role of population density disparity in driving global trade imbalances. As a result, the only way to have any meaningful impact on our trade deficit is by restricting imports.
It’d be fun to track the failure of this initiative if it wasn’t such a drain on the economy and if it wasn’t economically killing average Americans.
I’ll update this chart monthly.