I was out of the “office” last week, so I’m just now getting caught up on news about the trade deficit. On Wednesday, the Bureau of Economic Analysis released its monthly report on “U.S. International Trade in Goods and Services.” (Link provided above.)
There was bad news on the overall balance of trade which, once again, worsened dramatically – driven this time by the soaring price of oil. But the part of the report I’m interested in – and all Americans should be interested in, for this is where the jobs are – is the balance of trade in manufactured goods. And there we find some good news. Though imports jumped, exports jumped even more, bringing the balance of trade in manufactured goods in March – at $19.37 billion – more than 10% below its trailing twelve month average of $21.54 billion. That’s significant improvement.
Overall, exports rose to a pace that exceeds Obama’s goal to double exports in five years. However, although exports of manufactured goods jumped by nearly $7 billion in March, exports of manufactured goods are still slightly behind the pace needed to double them in that time frame. And, after all, manufacturing is where the jobs are.
The following are the charts of our overall balance of trade, the balance of trade in manufactured products, and where we stand with respect to Obama’s goal of doubling exports in five years.
The question is this: how much of this improvement in exports of manufactured goods and in the balance of trade in manufactured goods can be attributed to Obama trade policy, both overt and behind-closed-doors, and how much is simply due to improvement in the global economy driving an overall increase in global trade, boosting both exports and imports and leaving us no better off? Though the March deficit in manufactured goods is 10% below the 12-month trailing average, it’s still much worse than in early 2010 when global trade was stunted by the effects of the recession. And will it continue to improve, or is trade a bit of a lagging indicator, still enjoying the 4th quarter bump in global GDP growth, but now susceptible to the slowdown in 1st quarter GDP which, if anything, seemed to accelerate in April? Can we really believe that Obama has engineered a turn-around in trade and manufacturing without resorting to any meaningful change in the use of tariffs? Both history and my economic theory suggest that that’s not likely.