November Trade Report Best in Two Years

https://www.bea.gov/system/files/2020-01/trad1119.pdf

… or three years, depending on how you look at it.  In terms of the overall trade deficit, it was the lowest since October of 2016.  More importantly, the deficit in manufactured goods, at $63.2 billion, was the lowest since September of 2017 – good news, but that’s still a horrible deficit.  (A link to November’s report is attached above.)  Check out this chart of the balance of trade in manufactured goods:  Manf’d Goods Balance of Trade.

The drop in the deficit is due entirely to a decline in imports.  (Exports remain flat.)  Most notably, the deficit with China shrank to $26.4 billion, the lowest reading since March, and down from $37.9 billion during the same month in 2018 – a 30% drop.  This is solid evidence that the tariffs on China are having the desired effect.

In related news, this Reuters article reports that tariffs – primarily the tariffs on China – have cost U.S. companies $46 billion.  That’s actually good news.  It means that they’re “eating” the cost of the tariffs and not passing it on to consumers.  It also means that U.S. companies are evaluating what to do about it.  Should they keep their manufacturing in China in the hopes of waiting out the “trade war” for the tariffs to come down?  Or do they begin implementing plans to shift manufacturing to other locations?  If they choose the latter, do they move operations to some other country and risk facing tariffs there too?  Or do they bite the bullet and move operations back to the U.S.?  If the U.S. is serious about cutting its trade deficit, it has to remain committed to tariffs and implementing them on a much broader scale.  If they do, moving manufacturing back to the U.S.  is the only logical choice for U.S. companies.  Adapt or just keep “eating” those billions of dollars.

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