I’ve been tied up again with personal matters but am now back home and ready to catch up on some issues. The big piece of data that was released last week while I was out was the January trade deficit.
Just about the time that four months of improving trade data made me start to believe that behind-closed-door pressure by the Obama administration to rebalance the global economy was starting to bear fruit, the January trade data (released last week) blew a big hole in that theory. The January trade deficit soared to $46.3 billion from $40.3 billion in December. And it wasn’t some fluke driven by a swing in oil imports. $4.0 billion of that jump was due to manufactured products.
For months, imports seemed to have hit a ceiling of around $200 billion per month. But, with the U.S. economy finally beginning to gain some traction, that figure jumped to over $214 billion.
It never fails that every time I begin to doubt myself (in this case, my assertion that our trade picture cannot improve without a return to tariffs), I end up regretting it. With the release of the January trade deficit, we can see that nothing has changed. The trade deficit was being held down by the global recession, period. Exports are now increasing at a rate that has them doubling in five years, meeting Obama’s goal, only because overall trade is rebounding at that rate, including imports, which are rebounding even faster.
Here’s my charts tracking export and trade progress vs. Obama’s goals:
To my credit, I did hedge my optimism last month with the following possibility:
The slowdown in imports and rise in exports may be nothing more than the result of an economic rebound taking hold in the rest of the world, increasing demand for U.S. products, while a stagnant economy in the U.S. has kept a lid on imports. This doesn’t seem to be a scenario likely to persist for long (if it’s even real), since so much of the world is dependent on U.S. demand.
Indeed, it didn’t persist much longer. Imports are back, the trade deficit is up and it will take a toll on manufacturing jobs. The trade deficit will once again cut short the budding renaissance in U.S. manufacturing.