Led by China, Trade Deficit Falls in 2019

February 10, 2020

https://www.bea.gov/system/files/2020-02/trad1219.pdf

As reported by the Commerce Department on Thursday, America’s trade deficit in goods and services fell in 2019 for the first time in six years.  Trade in goods fell for the first time since 2016.  The decline was due entirely to the reduction of imports from China as a result of the tariffs put in place by the Trump administration.

The trade deficit in goods in 2019 fell to $853 billion from $875 billion in 2018. The decrease was led by a huge decrease in the deficit with China, which fell to $345.6 billion from $419.5 billion in 2018.  The trade deficit with China was the lowest since 2015.  Even more encouraging, the trade deficit in goods with China fell for the 5th consecutive month in December to $24.8 billion.  Imports from China fell by $87 billion in 2019.

Last month, the Trump administration signed the “Phase 1” trade deal with China, which rolled back some tariffs on Chinese imports in exchange for Chinese promises to boost imports of American goods.  The deal had been in the works for months.  If the Chinese wanted to demonstrate enthusiasm for this deal, they certainly didn’t show it in December.  The Chinese promised to increase their purchases of American goods in four different categories, using their 2017 imports as a baseline.  In 2020 they are to increase their purchase of American manufactured goods from $88.2 billion in 2017 to $121.1 billion this year.  They ended 2019 with purchases of $88.4 billion.

They promised to increase their purchases of American energy exports to $27.6 billion this year from $9.1 billion in 2017.  They ended 2019 with purchases of only $3.6 billion.

They promised to increase their purchases of American agricultural products to $36.5 billion this year from $24.0 billion in 2017.  They ended 2019 with purchases of only $10.2 billion.

And they promised to increase their purchases of American services.  That data hasn’t been released yet.

China needs to ramp up its purchases of American goods dramatically, beginning with the month just ended.  Did they?  We won’t know until next month when the January trade data is released.  Personally, I doubt that we’ll see much increase from China, if any.  They’ve already signaled that they think the coronavirus outbreak should give them a pass.  Trump will be a fool if he lets China get away with reneging on this deal.

Next month I’ll begin reporting on China’s monthly progress in meeting the terms of this deal.  I’ll also be keeping a close eye on the balance of trade with Mexico, now that the USMCA agreement has been signed into law.  I’m extremely skeptical of both of these agreements.  The only way to achieve a balance of trade with such densely populated nations is through the use of tariffs.  Such nations would never willingly agree to any deal that endangers their surplus of trade with the U.S.  But they’ll agree to any deal that forestalls the implementation of tariffs because it simply buys them more time for business as usual.

Time will tell, beginning next month.

 


China Already Weaseling Out of Trade Commitments

February 5, 2020

https://www.reuters.com/article/us-china-health-usa-supply/white-house-adviser-says-china-virus-to-delay-u-s-export-surge-from-trade-deal-idUSKBN1ZY1SD

As reported in the above-linked article, China has already begun to weasel out of the commitments it made in the “Phase 1” trade deal, signed only two weeks ago.  They’re blaming the coronavirus outbreak and citing a clause in the deal that provides for relief in the event of a “natural disaster or other unforeseeable event.”  And it seems that the Trump administration is buying it.

Give me a break.  At the time of this writing, approximately 500 people in China have died as a result of this new virus.  Compare that to the approximately 50,000 people who have died this season from the flu in China.  Ten million people die every year in China from one cause or another.  Remember that this is a country of 1.4 billion people, and we’re to believe that 500 deaths have rendered them unable to meet their trade commitments?  Do people in China eat less or otherwise consume less because of this outbreak?

Only two weeks into the trade deal, and China is already proving that it never had any intention of complying.  Rather, it was just a ploy to buy some time and tariff relief, in just exactly the same way that every other trade commitment it has ever made was merely a ploy to make the U.S. shut up and go away.  It seems to be working again.