Almost seven years ago, in the wake of his disastrous visit to Mexico to address our trade deficit – which resulted in a sharp rebuke from the Mexican president and even higher tariffs on American goods – President Obama decided to turn his focus on exports. “Why can’t we have an export-driven economy like Germany,” he challenged his economic team. Evidently, none of them responded that there is no other United States out there to serve as our trade patsy as we’ve done for Germany. So, in January of 2010, the president proclaimed that, within five years, the United States would double its exports. This would be the centerpiece of his economic agenda.
Yesterday the Bureau of Economic Analysis released its monthly report of International Trade in Goods and Services. The overall trade deficit came in at $42.4 billion in October, right in the range where it has been throughout the Obama administration. There isn’t another economic report that chronicles America’s economic demise as clearly as this one does, yet the reaction was the same as it’s always been: ho-hum. Unbelievable.
To get to the real heart of the problem – the siphoning of jobs out of our economy – you have to strip away the “noise” – the trade in services, oil and food. What’s left is trade in manufactured products, and the picture there grows worse with each passing month. The deficit in manufactured products was $57.9 billion in October, not far from the record of $62.5 billion set in March of last year. Check out this chart: manfd-goods-balance-of-trade.
Especially pathetic is the contribution of declining exports to the increase in the deficit. In October, manufactured exports fell to $104.3 billion, the lowest level in over 5-1/2 years. (Exports of manufactured goods were $104.9 billion in March, 2011.) Manufactured exports have fallen by $10.3 billion since peaking at $114.6 billion exactly two years ago. To reach Obama’s goal, exports would have had to rise to $171.7 billion. They never even came close. Here’s a chart showing both manufactured exports and imports since Obama made his vow to double exports: manfd-exports-vs-goal. A complete failure, and no surprise. The U.S. has no control over exports. But at least deflecting attention away from the steady growth in imports – and the corresponding steady decline in manufacturing jobs – made things more pleasant for Obama around the punch bowl at G20 meetings.
Frankly, I’m sick of tracking this statistic under the Obama administration, watching it get predictably worse. Only two full months of data remain – November and December. Then things get interesting again. This deep hole that’s been dug under the (lack of) leadership by Obama becomes Trump’s baseline. How far and how fast can he whittle down this deficit? Could he even turn it into a surplus, like we used to enjoy forty years ago? Time will tell. A deficit of $60 billion in manufactured goods represents a loss of ten million manufacturing jobs, and probably an equal number of jobs in ancillary industries. Such a demand for labor would mop up every last unemployed person in the country and send wages soaring. If Trump accomplishes even half of this, people will be stunned at the effect on the economy.