Why the U.S. Trade Deficit is Widening Again

Alan Tonelson |

The U.S. goods and services trade deficit rose by 3.38 percent in October and the increase would have been much greater had the September total not been revised up by a substantial four-plus percent. Total exports fell to their lowest level since October, 2012 and the manufacturing trade deficit set its third new new monthly record in four months and remains on track to hit another new annual record. In current dollar terms, the petroleum trade deficit shrunk to its smallest level since April, 1999 and pre-inflation oil imports were the least since November, 2003. Adjusting for inflation, the petroleum trade deficit represented a post-August, 2014 low, and real oil imports stood at their low point since March, 1996. The China merchandise trade deficit fell sequentially, but is running more than seven percent ahead of last year's record pace. And the policy-influenced trade deficit has now slowed the current recovery by nearly 20 percent in real terms – or more than $400 billion.

Here are selected highlights of the latest monthly (October) trade balance figures released this morning by the Census Bureau:

>The combined U.S. goods and services trade deficit rebounded by 3.38 percent in October on month, to $43.89 billion, and the percentage gain would have been greater if not for an unusually large (4.03 percent) upward revision in the September figure – from $40.81 billion to $42.46 billion.

>Goods and services imports fell sequentially in October, too, and reached their lowest level since June, 2013. But the decrease – from an upwardly revised $229.22 billion to $227.95 billion – was much smaller proportionately (0.55 percent) than the export decline.

>The nation's huge and chronic manufacturing trade deficit hit its second straight monthly record in November, and third in the last four months. The $76.74 billion figure topped September's previous all-time high by 2.75 percent.

>Manufactures exports in October rose month-to-month by 2.43 percent – from $92.83 billion to $95.08 billion. But manufacturers imports were up by 2.57 percent – from $167.52 billion to $171.82 billion.

>The October figures brought manufacturing's year-to-date trade deficit to $691.09 billion. That's 14.06 percent greater than last year's comparable total – which wound up setting a new record.

>Manufactures exports for the first ten months of this year are running 6.10 percent behind last year's levels, while imports are 1.52 percent greater.

>The October trade figures also revealed several multi-year lows for America's petroleum trade. The pre-inflation petroleum trade deficit fell plunged on month by 19.64 percent, with the $4.47 billion figure representing the lowest since April, 1999. Current dollar oil imports sank by 13.16 percent from September to October, to a $12.01 billion total that's the lowest since November, 2003.

>Adjusting for inflation, the October petroleum trade deficit was down by 7.84 percent on month. The $8.26 billion total is the smallest since August, 2014. But October's $16.18 billion in real oil imports are the lowest monthly total since March, 1996 – and marked an 8.65 percent decrease since September.

>America's China merchandise trade enjoyed a relatively good month in October, with the deficit down from September's record $36.28 billion to $32.97 billion. At the same time, that total was the year's third biggest.

>Although China's economic growth is slowing, U.S. goods exports to the PRC jumped 20.80 percent in October sequentially to $11.38 billion – the year's highest total. U.S. goods imports fell by 9.11 percent, to $32.97 billion.

>Nonetheless, the U.S.-China merchandise trade deficit this year so far is running 7.62 percent ahead of last year's record total.

>U.S. goods exports to China this year are running 4.04 percent behind last year's totals, and imports are running 4.62 percent ahead.

>The October figures again showed that the nation's trade performance – and especially the trade flows heavily influenced by trade agreements and similar policy decisions – have drained major amounts of valuable growth from America's already sluggish economic recovery.

>The inflation-adjusted goods deficit for the third quarter of 2015 – which strips out trade in oil and services that are not significantly affected by trade policies – has now come in at a record $166.88 billion on an annualized basis. As a result, its increase – from $65.95 billion in the second quarter of 2009, when the last recession ended – has slowed the economy's cumulative growth by $403.21 billion, or 19.58 percent. Worse, virtually all of this lost growth has come in the private sector.

>The October trade figures brought the combined pre-inflation U.S. global trade deficit to $444.95 billion this year – 5.25 percent greater than the $380.00 billion for the first ten months of 2014.

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