The above-linked March trade report is showing signs that Trump’s trade policies – particularly the tariffs on Chinese imports – may be beginning to yield positive results for the U.S. economy.
The overall trade deficit held steady at the same level as February at $49.3 billion, the lowest level since June, 2018. More importantly, the trade deficit in manufactured goods fell $1.1 billion to $68.2 billion, also the lowest level since June, 2018. More encouraging is the way in which it fell, with imports falling $0.9 billion while exports of manufactured products rose to their highest level since May, 2018. Here’s a chart of the trade deficit in manufactured goods: Manf’d Goods Balance of Trade.
In the past few months there’s been a lot of volatility in the data as U.S. businesses stocked up on Chinese imports to avoid the tariff. Perhaps the March data reflects a slowdown in imports as businesses now find themselves overstocked, but I think that’s not likely. I thought that when the February data was released, but it seems unlikely that such an overstocked condition could persist for three straight months. It also wouldn’t explain why manufactured exports are at their highest level in ten months.
Most encouraging of all is that the trade deficit with China fell dramatically in March for the fifth straight month to $20.7 billion, its lowest level since March, 2014 – an unusually low deficit that year – a level more typical of the monthly deficits with China back in 2007.
Trump’s trade policies – attacking our trade deficit with tariffs – is working. As I write this, on the very day that the tariffs on $200 billion of Chinese imports were more than doubled to 25%, the stock market has shrugged it off, recovering all of its early losses. Investors are beginning to sense that all of “the sky is falling” warnings of dire consequences of the big, bad, scary U.S.-China trade war is a bunch of baloney. They’re beginning to look past it, looking for companies that will benefit, and they’re finding plenty. The fact is that China has been a huge drag on the American economy and even the global economy, and investors are beginning to see it that way. That’s China’s worst nightmare and a dream come true for Trump, now more confident in pressing these policies even further.