As reported by the Census Bureau this morning (see above link), a nice increase in exports in May was swamped by a tidal wave of imports. While total exports rose by $3.5 billion in May, the growth in imports from China alone nearly matched that figure. Add in the growth of imports from Mexico and the EU, and total imports of $5.5 billion resulted in a dramatic worsening of the U.S. trade deficit.
Actually, the news is even worse when you consider that the price of oil dropped a little in May, resulting in a $2.6 billion improvement in the petroleum trade deficit. The deficit in non-petroleum goods actually worsened by a whopping $4.6 billion, one of the worst monthly increases on record. Non-petroleum goods imports jumped an incredible $7.6 billion.
The huge increase in Chinese imports, the third monthly increase in a row, was a slap in the face for Obama, who has constantly prodded the Chinese to grow their domestic economy and rely less on exports. Obama’s sole focus has been on export growth, setting a goal in January to double exports in five years, naively hoping that we can export our way back to a balance of trade. The following chart shows that while his goal for exports is on track, we’re paying the price for his neglect of the import side of the equation.
The result is that, after falling by 33% in the first five months after Obama took office, our trade deficit has since exploded by 52% and is now worse than when he was inaugurated. If he’s looking for a reason why his economic stimulus plan has fizzled, he need look no further than his failure to follow through with trade policy that assured continued progress on improving our balance of trade.