The latest official US monthly trade report on Wednesday (for April) showed the country’s chronically huge trade deficit shot up a whopping 23.04 percent sequentially, from $60.59 billion to $74.55 billion in March.
But did that really happen?
I ask because of the unusually large revisions to the total deficit for March: it was cut an astonishing (at least to trade data fans) 5.66 percent, from $64.23 billion to $60.59 billion. . That’s the lowest total since the $58.18 billion recorded in September 2020, when the economy was still shaking off the dismal disruptive effects of the first wave of the CCP virus.
Not that I doubt that the deficit increased. It’s just that magnitude counts a lot. So it’s okay to be impressed that this April reported level is the highest since last October’s $78.33 billion, and that the rise is the fastest since the March 2015 weather-affected results (45, 74 percent). But keep in mind throughout this post that this and many other major March revisions greatly affect the sequential baseline for judging April increases and decreases. Therefore, they inevitably create doubts about its true scope. And don’t forget that the April data could also see major revisions.
With those caveats in mind, let’s proceed to note that if April’s overall trends hold, the new data shows that the deficit worsened for the worst possible combination of reasons: exports fell and imports rose. That grim pattern hasn’t appeared since last December, and if it continues, it could mean the economy is transitioning from a period of relatively healthy sustainable growth that led to saving and output to one of eerily bubbly growth, led by borrowing and spending.
In this sense, the goods deficit in April went from $81,580 million to $96,110 million. The level was the highest since last October’s $98.21 billion, and the 17.81 percent pace was the highest since the weather-affected 25.18 percent in March 2015. Do not forget, however, that the goods deficit for March fell by 5.79 percent, from 86.590 million dollars to 81.580 million dollars. That’s also the lowest total since September 2020 ($79.25 billion).
Monster’s revisions also affected the services trade surplus figure for April. It represented an improvement of 2.73 percent, from $20.99 billion to $21.56 billion. That number is the best since March 2021, $21.94 billion, and the biggest jump since last October’s 5.90 percent. But the March result was revised down even more than the total trade deficit or goods deficit results: 6.15 percent (from $22.37 billion).
Combined exports of goods and services fell from $258.19 billion to $249.02 billion, a decline of 3.55 percent that brought them to the lowest level since March 2022 ($245.68 billion). . And the drop was greater since the peak of the pandemic in March 2020: 9.48 percent. The revisions to total exports for March were not insignificant either: 0.80 percent higher.
Total imports in April, however, increased for the first time since September, growing 1.50 percent, from $318.780 million to $323.570 million. That March figure is a downward revision of 0.50 percent.
Like total exports, US foreign sales of goods fell from $176.46 billion to $167.1 billion. This 5.30 percent contraction pushed goods exports to their lowest level since February 2022 at $161.45 billion and the decline was the steepest since the pandemic peak-y April 2020 at 25.52 percent. hundred. The March reviews? An improvement of 1.23 percent.
By contrast, exports of services rose 0.22 percent in April (from 81.73 billion dollars to 81.91 billion dollars) and set their fifteenth consecutive record in the process.
April’s increase in goods imports was the first since December, and at $262.22 billion it was 2.01 percent higher than March’s figure of $258.04 billion. But that number was revised down by a hefty 1.10 percent.
In April, imports of services declined for the first time since last October, falling 0.64 percent. The drop was the biggest since January 2022, 1.72 percent, but as with most of these other business figures, it was surely affected by the significant 2.13 percent revision (in this case, upwards). of the March results.
While the March trade numbers were dominated by a more than tenfold monthly increase in the petroleum products surplus (by $6.4 billion), results in this category played a less prominent role in the April data: the surplus was reduced by 3,740 million. .
April’s rebound in the combined goods and services trade deficit was led by a 12.19 percent widening of the non-oil goods deficit (which reality check Most usual know that it can be called the Made in Washington trade deficit, because it consists of the trade flows most heavily influenced by US trade agreements and other political decisions).
This increase in the Made in Washington deficit amounted to $10.89 billion, the new deficit of $100.29 billion was the largest since $103.30 billion in May 2022, and the increase was the largest since the burst of 20.74 percent in March 2022.
These exports of non-oil goods fell from $146.58 billion to $141.73 billion (3.31 percent) and this third consecutive drop pushed the total to its lowest level since March 2022 ($142.09 billion).
Imports of non-oil goods increased for the first time since December and 2.56 percent, from 235.970 million dollars to 242.010 million dollars.
reality check regular customers also know that Made in Washington trade data is useful because it is a close proxy for China trade data. Thus, they may shed light on the effectiveness of the high and sweeping tariffs imposed on imports from China by former President Donald Trump and continued overwhelmingly by President Biden.
China’s goods deficit widened 22.12 percent in April, nearly double the non-oil goods deficit. And the increase from $16.61 billion to $20.28 billion was the largest in percentage terms since it soared 88.77% in April 2020, as China’s economy continued to recover from the first wave of the CCP virus.
At the same time, this China goods gap was the second narrowest (after March’s $16.61 billion) since March 2020’s $11.71 billion, earlier in the People’s Republic’s recovery.
Exports of goods to China fell 9.78 percent in April, from 14.18 billion dollars to 12.79 billion dollars. And imports of goods advanced by 7.43 percent, from 30.790 million dollars to 33.080 million dollars. That total was the highest since January’s $38.25 billion and the biggest increase since last August’s 8.18 percent.
However, for a longer (and therefore more informative) period, one cannot legitimately doubt the effectiveness of the tariffs. Primarily on a January-April (year-to-date, or YTD) basis, the US goods trade deficit with China has plunged 38.17 percent. The world deficit of non-oil goods has been reduced by less than half: 15.13 percent.
The chronic and huge manufacturing deficit worsened in April, but only modestly: by 3.48 percent, from $109.64 billion to $113.45 billion. The level was the highest since January’s $116.83 billion, but well below the record (March 2022, $242.22 billion).
Manufacturing exports in April fell by 10.72 percent, from 116.6 billion dollars to 104.1 billion dollars.
That setback, the largest by far since the pandemic-plagued 30.15% plummet of April 2020, prevented the 3.84% decline in manufacturing imports (from $226.24 billion to $217,550 million dollars) narrowed the gap or even stabilized it.
At the same time, the manufacturing deficit may be turning around. On a YTD basis, this shortfall is 10.92 percent below last year ($439.97 billion vs. $493.88 billion). If this trend continues, the annual manufacturing deficit would decline for the first time since the semi-recession year of 2009.
The trade gap in advanced technology products (ATP) also widened month by month in April. The increase was 4.53 percent, from $14.31 billion to $14.96 billion.
ATP exports plummeted 12.43%, from a record of $38.33 billion to $33.57 billion, the biggest drop since January 2022, of 12.92%.
The largest amount of ATP imports also decreased, with a decrease of 7.82 percent (from $52.65 billion to $48.53 billion) representing the largest monthly decrease also since January 2022 (12.92 percent).
Geographically, aside from flows from China, changes in the balance of trade in goods with the world’s largest economies were quite scattered.
The trade deficit with the signatories of the Agreement between the United States, Mexico and Canada (USMCA, for its acronym in English) was reduced by 1.42 percent.
The goods deficit with the euro area grew by 4.59 percent.
And that with Japan increased by 11.81 percent.
And as is often the case, all these changes were dwarfed by a huge increase (76.35 percent) in the often extremely volatile goods trade deficit with Switzerland.
However, despite the uncertainties based on the aforementioned revisions, this April US trade report looks like the latest sign that, after an encouraging period of economic growth accompanied by a narrowing trade deficit, the nation it is reverting to its decades-long pre-CCP virus growth pattern. stimulating the expansion of the deficit. And as suggested above, if the trend continues, it could usher in another dangerous bubbling leg.