I’ve been gone for a couple of days and am just catching up on Wednesday’s news about the trade deficit. (A link to the report is provided above.) I just about fell over when I heard the report on the news. The trade deficit exploded in June to $49.9 billion from $42 billion in May, by far the worst montly trade deficit since the beginning of the global financial crisis in October, 2008.
As bad as it sounds, the details are even worse. Swings in the deficit have often been the result of a big change in oil imports. But, in June, petroleum imports actually fell by almost a billion dollars. The deficit in non-petroleum goods exploded by 24% from $32.2 billion in May to $40 billion in June.
Exports fell by 2.2%, though exports remain pretty much on track for meeting the president’s goal of doubling exports in five years. But any improvement in exports has been swamped by imports. Here’s the charts:
Those two charts don’t look all that alarming until the balance of trade is plotted:
When the president took office, the trade deficit was in free-fall, right along with the rest of the global economy. Four months after he took office, it fell to less than $25 billion – little more than a third of its all-time high before the onset of the recession. This alone probably had more to do with stabilizing the economy than anything associated with the stimulus plan. But since then, in only 13 months, the trade deficit has more than doubled and the economy is on the brink of sinking back into recession.
The president’s economic strategy is in shambles. He naively counted on nations like China, Germany and Japan to honor their pledges to depend less on exports and more on growth in their domestic economies. And he crossed his fingers and proclaimed that we’ll double exports in five years. All in the hope of restoring some balance to the global economy. Predictably, this strategy is proving to be an abysmal failure. What little boost manufacturing has gotten from some growth in exports has been dwarfed by a tidal wave of imports. Unemployment remains stubbornly high and a mountain of stimulus spending has barely kept GDP out of the red. The economy stands once again at the brink.