With a year-and-a-half of the Obama presidency left to endure, it might seem a bit premature for post-mortems of his administration, but this call is easy to make at this point because his policies only assure that, as bad as the situation is, it will only be worse by the end of his administration. I’m talking about trade. President Obama was elected in no small part on the hopes that he would fulfill his campaign promises and address what was, at that time, an already enormous trade deficit.
However, soon after taking office, his fledgling attempt at addressing our trade deficit with Mexico was an absolute disaster. Mexico sent him home with his tail between his legs and new tariffs on American goods. Soon after, he turned his focus away from imports toward exports, questioning his economic team why the United States can’t be an exporting powerhouse like Germany. Obviously, no one on his team pointed out to him that Germany is an exporting powerhouse because it has the United States to serve as its importing stooge, and that there are no other such stooge countries out there to do the same for us.
He obviously didn’t get this message because, in January of 2010, he publicly proclaimed a new focus on exports and vowed that the United States would double its exports within five years. That was 5-1/2 years ago. Why do I bring all of this up now? Because the June trade figures, released last week, put an exclamation point on just how abysmal his failure on trade has been. Exports fell yet again and our trade deficits with China and the EU set records in June.
At the time that he vowed to double exports, I knew and predicted that it was impossible for this strategy to succeed because the United States has almost no control whatsoever over exports, which are driven entirely by foreign demand. What few measures are at the president’s disposal to influence exports – primarily things that would make American manufacturers more competitive – are all easily countered by similar measures taken by other countries.
So I began to track the data, beginning in January, 2010. Since then, America’s already-bad trade deficit is now even worse. Here’s a chart of our total trade deficit: Balance of Trade. Our total trade deficit has worsened from $37 billion to almost $44 billion in June. That may not seem so bad until you consider the fact that, during that same period, our deficit in oil improved from $22 billion to $6.3 billion, almost all of which is due to a big jump in domestic production. Take that away, and our total trade deficit would now be $60 billion.
The real trade story is what has happened to the trade deficit in manufactured products which, incidentally, is where the real opportunity for job creation lies. Look at what has happened to the deficit in manufactured goods since January, 2010: Manf’d Goods Balance of Trade. It has nearly doubled! And what about exports, the focus of Obama’s strategy? Manufactured exports in June were actually lower than in September, 2011. In other words, manufactured exports haven’t increased one iota in nearly four years! Here’s the chart: Manf’d exports vs. goal.
If this isn’t a total failure, then I don’t know what is. (It should be noted that this failure isn’t just the result of turning a blind eye to trade. President Obama’s disastrous trade deal with South Korea, which he proclaimed a “big win for American workers,” has played a key role in the worsening of the manufactured goods deficit. Our trade deficit with S. Korea is on track to double what it was only three years earlier!) The president owes the American people an explanation for this abject failure and for letting us down so badly on one of the key campaign promises upon which he was elected.