On the surface, the latest numbers show President Donald Trump may be poised to deliver on one of his biggest economic promises: reducing the annual U.S. trade deficit with China and the world. Dive into the numbers, though, and that accomplishment comes with plenty of caveats and even some worrying signs for the U.S. economy.
November trade data released Tuesday showed that the U.S. goods and services deficit decreased by 0.7%, or $3.9 billion, in the first 11 months of 2019 from the same period a year earlier. That puts the annual shortfall on track to shrink for the first time since Trump took office.
“Clearly the Trump tariffs are working,” White House adviser Peter Navarro told Bloomberg.
For Trump, exports and imports are like assets and liabilities on a corporate balance sheet: If you’re in the red, you’re losing. Nevermind that the U.S. has been running a trade gap on an annual basis since the mid-1970s. Or that deficits typically widen during expansions and shrink during recessions, as they have during the past few U.S. contractions because waning domestic demand curbed imports.
For the president, American manufacturing jobs have shifted overseas thanks to decades of poor trade policy and the deficit is the gauge that will show whether his strategy is working.
Or will it? Yesterday’s numbers point to dueling realities. Yes, Trump’s tariffs are shifting trade flows in some intended ways. But not all the changing contours are positive signs. Here’s a closer look:
Over the course of Trump’s term, the deficit has widened, so in that sense he has not succeeded.
“What he has shown is if you put big enough tariffs on, that can change both the bilateral balance of trade,” said Brad Setser, a senior fellow at the Council on Foreign Relations. “What he hasn’t shown is that his tariff-based strategy can generate a revival in U.S. manufacturing.”
Stay tuned. We’ll know more on Friday about how factory workers fared in 2019 when the Labor Department releases the employment report for December. Even if manufacturing jobs rise by the median economist estimate of 5,000 positions, it will be the second-worst calendar-year performance in the past decade for that key Trump constituency.
Charting the Trade War
U.S. imports from China fell for a sixth straight month in November as the trade war between the world’s two largest economies dragged on before a tentative truce was announced in December. Officials from both sides are planning to sign the phase-one deal on Jan. 15 in Washington.
The US Treasury Department is seeking engagement with China while also sharpening the economic tools needed to counter what it sees as national security challenges, according to two officials, highlighting…View Article
The European Union is pushing the US to facilitate trade by agreeing on common technical requirements for manufacturers of some clean technologies as the two sides seek to strengthen their…View Article
Taiwan’s de facto ambassador to the US said the lack of a double taxation treaty is “unfair” and discouraging investment from Taiwanese semiconductor firms, while adding she hopes recent trade…View Article
German car manufacturers have called for a delay in implementing the post-Brexit regulations concerning electric vehicles (EVs). The German auto industry argues that the proposed rules could potentially disrupt the…View Article
Industry updates and weekly newsletter direct to your inbox!