Don’t take my word for it. Read the report yourself and delve into the details. Here’s a link to the October trade data, released this morning by the Department of Commerce: http://www.bea.gov/system/files/2018-12/trad1018.pdf.
We’ve all heard the stories. The trade war between the U.S. and China is dragging down the global economy. The manufacturing sector in China is slowing. Retaliatory tariffs by China have virtually halted soybean exports from the U.S. and soybean prices are down. Auto exports are in decline. Tariffs on steel and aluminum are making the U.S. uncompetitive. The October trade data makes clear that these stories are all a bunch of B.S. – lies spread by free trade globalists in the hope of heading off more and higher tariffs.
Let’s begin with the big picture. The total trade deficit was only $0.07 billion off from the record set one month earlier. Here’s the chart: Balance of Trade. In terms of the all-important category of manufactured goods, where the jobs are, the trade deficit broke the previous month’s record for the fourth consecutive month, blowing past last month’s record by $1.6 billion to a new record of $73.3 billion. That’s an annual rate of $880 billion. Take a look at this chart: Manf’d Goods Balance of Trade. If that was a chart of your household spending, you would be in an absolute panic over the deterioration in your finances.
Now, as for those bogus stories about tariffs, let’s dig into the details of the report. First, there’s the claim about China’s economy being dragged down. See page 3 of the report. The goods deficit with China rose to $38.2 billion (expressed in 2012 dollars). That’s a new record. If anything, the report understates just how bad the trade picture with China has gotten. Check out the balance of trade with China in current dollars: https://www.census.gov/foreign-trade/balance/c5700.html. The goods deficit with China has absolutely exploded, setting records for the past four consecutive months. For all the whining you hear from Chinese officials, the truth is that they’re making more of a killing than ever before at the expense of American workers.
What about soybeans? We’ve all seen the news reports about how much the tariffs have hurt American farmers. It’s baloney. Go to page 20 of the October trade report. Soybean exports, while down a little in October, year-to-date are running far ahead of the same time last year: $24.1 billion vs. $19.4 billion in 2017. The stories talk about how much exports to China have declined. They don’t mention that the decline has been more than offset by an increase in soybean exports to Europe. (Europe turned to the U.S. for its soybeans when China shifted its soybean sourcing to Brazil, displacing Europe from their Brazilian source and forcing them to the U.S.) Given the year-to-date volume of exports, if prices are down now, it’s likely because of a glut in soybeans.
Auto exports? See page 21. They were down very slightly in October from September but, year-to-date, are up to $134.1 billion vs. $130.6 billion in 2017. By the way, as reported on Monday, domestic vehicle sales in November held steady at the very high level of 17.5 million vehicles, debunking the whining by auto manufacturers that sales are in decline.
Steel and aluminum? Both exports and imports are up. Over the Thanksgiving holiday, I asked my nephew who works for a steel manufacturer in Indiana how their business is doing. He reported that they had already blown past the sales record they set in 2017 by a substantial margin.
While the tariffs implemented so far have been too few and too small to have a dramatic impact on manufacturing repatriating to the U.S., there’s some very good news that you don’t hear about. In October, thanks to the 10% tariff on steel and aluminum and the 10% tariff on $200 billion of Chinese imports, federal revenue from these tariffs was approximately $30 billion, a significant contribution toward reducing the federal budget deficit. If kept in place, those small tariffs alone would cut the annual budget deficit by $360 billion, or by about a third. That’s huge, folks! Just imagine what would happen if Trump applied the tariffs to all Chinese imports, and raises them to 25%, and also applies a 25% tariff to all auto imports. We’d have our first balanced budget in decades, not to mention companies scrambling to build domestic manufacturing capacity!
So ignore all the doom and gloom and hand-wringing by the free trade globalists. It’s all a bunch of baloney, meant to scare you and meant to apply political pressure to stop any further tariffs. If everyone knew the truth, they’d be applauding the Trump administration for its trade policy and would be demanding more and higher tariffs.