New GDP Data Reveal Worst-Ever Trade Hit to U.S. Growth

Alan Tonelson |

As Congress continues voting in favor of fast-tracking President Obama's trade agenda, Wednesday’s revised first quarter GDP figures reveal that a worsening U.S. trade deficits took the biggest relative quarterly bite out of economic growth on record. Moreover, the new data confirm that both the widening trade shortfall and the growing gap in trade flows shaped by trade deals keep slowing an already historically weak recovery – the latter by nearly 20 percent in real terms. The new GDP revisions also continue showing that last quarter's after-inflation trade deficit was the nation's biggest since early 2008 – when the economy grew respectably, not shrunk.

Here are the trade highlights from Wednesday's GDP report:

  • The third and final (for now) estimate of first quarter GDP figures show that the expansion of the U.S. trade deficit slowed America's inflation-adjusted economic growth by the greatest degree in relative terms since quarterly changes began to be tracked – in 1947.
  • According to the new data, the real goods and services deficit subtracted 1.89 percentage points from a constant dollar GDP contraction of 0.20 percent in annualized terms in the first quarter. That's a bigger proportionate hit than the 1.90 percentage point subtraction from the 0.70 percent real annualized GDP decline reported in the previous estimate. The new trade hit also exceeds the 1.60 percentage point subtraction from the 0.30 percent real annualized GDP increase during the fourth quarter of 2002.
  • The biggest absolute trade hit to real growth occurred in the third quarter of 1982 – a 3.22 percentage point subtraction. But in that quarter, overall GDP fell at a much greater 1.40 percent annualized rate.
  • As a result of the latest revisions, the rise of the trade deficit has cut cumulative U.S. real growth during the current, historically weak recovery by 9.40 percent. Through the first quarter, the growth blow delivered by the rise in the deficit most heavily affected by trade deals  and related policies – the real non-oil goods deficit – has been 19.82 percent.
  • This trade policy-related lost growth amounts to just under $647 billion out of the economy's cumulative real GDP increase of $1.9321 trillion since the recovery technically began in the middle of 2009.
  • Wednesday's GDP data show a modest narrowing in the estimate of the first quarter's real combined goods and services trade deficit – from the $548.4 billion reported in the previous estimate to $548 billion. But this total still represents the biggest quarterly real trade gap since the second quarter of 2008.
  • Nonetheless, during that quarter, the economy ran a $550.4 billion real trade deficit when it grew at a two percent real annualized rate. The latest, slightly smaller, trade deficit came during a quarter when the economy shrank at a 0.20 percent real annualized rate.
  • The new GDP report revised the quarterly decline in real exports from 7.6 percent in annualized terms to 5.9 percent. But the quarterly increase in real imports was revised from 5.6 percent to 7.1 percent annualized.
  • As a result, real combined imports, real goods imports, and real services imports all confirmed their quarterly record levels – which now stand at $2.6433 trillion, $2.1602 trillion, and $482.4 billion, respectively, annualized.
  • The new record quarterly real services export total revealed in the previous GDP estimate was revised slightly higher Wednesday – from $667.7 billion annualized to $667.9 billion.

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