Almost lost in the election coverage was yesterday’s Commerce Department report on trade. The trade deficit in goods and services increased 7.6 percent in September to $43 billion. Overall, imports remained steady but exports declined: goods down $2.6 billion to $136.1 billion and services down $400 million to $59.5 billion. The United States typically runs a surplus in services but a much larger deficit in goods.
Here’s how it looks on a balance-of-payments basis:
As you can see, America has long run a deficit. It got much worse after 2000, when China entered the World Trade Organization, improved when domestic demand collapsed in the recession, but has remained seriously underwater during the recovery. We sell plenty overseas but we buy more, a condition that became much more serious after the turn of the century:
The imbalances were not cured by the Great Recession. Indeed, our trade deficit with China reached a record high. The Chinese slowdown is only part of the problem.
Economist Alan Tonelson a longtime trade watcher, offers a deep dig into the numbers. He points out, for example, the deficit in high-tech goods more than doubled, from $4.52 billion to $10.46 billion, bringing this segment back to 2013 levels.
Washington is an outlier state, running a surplus — but that is heavily dependent on Boeing commercial airplane orders being booked here.
A trade deficit in itself is not necessarily a bad thing when you are 1) the sole superpower; 2) enjoy the benefits of owning the world’s reserve currency; 3) boast the world’s largest economy and 4) are the world’s largest exporting nation. That was where we stood in the 1980s and 1990s. No. 4 is no longer the case. And although we are still the world’s largest economy, it has been badly hollowed out.
In addition, running a mammoth trade deficit creates a nasty feedback loop. Americans buy more stuff from overseas, getting cheap goods but undermining domestic industries and hence their own jobs and wages. The trade deficit represents millions of lost jobs.
Today’s Econ Haiku:
What will be Job 1?
Shutdown, default, impeachment?
Oh, let’s kill Amtrak!