January Goods Trade Balance Dives

Figure 1: Goods trade balance (blue), and trade balance (red), in billions of $, SAAR. Orange shading denotes 2017M01-onward. Source: BEA/Census, author’s calculations.

I think I’ve had enough of “winning so much”.

18 thoughts on “January Goods Trade Balance Dives

      1. Moses Herzog

        Don’t misinterpret this comment. I think challenging things and questioning things is good. No doubt I will have 1 or 2 “rows” with Menzie over something in the future. But I think Menzie must get damned tired of commenters trying to play “gotch-yuh”, especially vis-avis graphs. Folks, the man has a Phd from “a little known” school named Berkeley. He teaches at a well-respectd D-1 school. He’s been published in many well-respected and peer reviewed journals. Not to mention (if it doesn’t annoy Menzie too much me mentioning it) all the positive stereotypes regarding Asians in science and math. Just maybe, I mean just maybe the man knows what the hell he is doing?? Just a passing thought for all you Facebook published rocket-scientists out there.

      2. Ed Hanson.

        OK Menzie

        I suspect have to go back for lessons, just it seemed Goods Trade Balance at almost -900 billion seems awfully big seasonably adjusted or not. But I assumed from the title that and form of your graph that it was monthly totals not annual totals. Sorry.


        1. Menzie Chinn Post author

          Ed Hanson: Then beware too US GDP estimates at the quarterly frequency (e.g., 2017Q4 GDP is 17,271.702 billion). They are reported SAAR as well.

  1. pgl

    To be fair, exports are up with imports rising by even more. I guess one could argue that a stronger economy translates into more imports.

  2. spencer

    I have not seen an estimate in recent years, but we use to talk about the very high US propensity to import.

    I wonder what recent estimates of import elasticity of demand would look like — 1.5, 2.0 ???

  3. Paul

    The increasing trade deficit MUST be offset by increasing the federal budget deficit. Otherwise, aggregate demand will be insufficient. Keynes faced the same issue:

    “It is often pointed out that, when loan-expenditure (deficit spending) was on a larger scale as a result of official encouragement, this did not prevent an increase of unemployment. But at that time it was offsetting incompletely an even more rapid deterioration in our foreign balance. The effects of an increase or decrease of £100,000,000 in our loan-expenditure are, broadly speaking, equal to the effects of an increase or decrease of £100,000,000 in our foreign balance. Formerly we had no visible benefit from our loan-expenditure, because it was being offset by a deterioration in our foreign balance. Recently we have had no visible benefit from the improvement in our foreign balance, because it has been offset by the reduction in our loan-expenditure.” The Means to Prosperity, p. 16.

    1. Steven Kopits

      The budget deficit is driving the trade deficit. At full employment, excess demand will disproportionately be satisfied from net imports.

        1. Steven Kopits

          Initial unemployment claims at the lowest level since 1969? We’re pretty close to full employment. Close enough that if the deficit jumps up over a short period of time, domestic supply probably can’t adjust fast enough.

          1. Dave

            “We’re pretty close to full employment.” If you completely ignore the Employment to Population Ratio for prime age workers. . . . Of course, you should not.

      1. Paul

        So reducing the federal budget deficit would cause the trade deficit to be significantly reduced?
        When has that ever happened? Oh right, never. In fact, the opposite is true.

        In the period 1998 through 2000, when we had a budget surplus, the trade deficit increased the whole time.
        OTOH, in 2008 and 2009, as the budget deficit dramatically increased, the trade deficit decreased substantially.


        Facts are not your friends.

        1. spencer

          The calculation is the gap between savings and investments. Most of the time since 1980 that has been created by the federal deficit. If you assume that the federal budget was in balance, savings would have exceeded investment ( the fed deficit is treated as negative savings) every year since 1980 except for a few yeas in the late 1990 — just what you pointed out . In the late 1990s period, investment was greater than savings, but the imbalance was driven by large scale capital spending. Generally, economists consider a current account deficit used to finance capital spending to be positive while foreign borrowing to finance greater consumption is viewed as a negative. Supposedly, borrowing to finance investment creates the capacity to repay or service the foreign debt.

          Paul, while the fact you report is correct, I doubt if you really understand the forces driving the imbalance you have reported.

          1. Paul

            “I doubt if you really understand the forces driving the imbalance you have reported.”

            I take the view of Keynes:
            “Income = value of output = consumption + investment.
            Saving = income – consumption.
            Therefore saving = investment” The General Theory, p. 63.
            Thus, there can be no “gap between savings and investment.”

            In fact, you don’t seem to understand the fundamental principle of Keynesian economics:
            “Saving and Investment are the determinates of the system, not the determinants. They are the twin results of the system’s determinants, namely, the propensity to consume, the schedule of the marginal efficiency of capital and the rate of interest. These determinants are, indeed, themselves complex and each is capable of being affected by prospective changes in the others. But they remain independent in the sense that their values cannot be inferred from one another. The traditional analysis has been aware that saving depends on income but it has overlooked the fact that income depends on investment, in such fashion that, when investment changes, income must necessarily change in just that degree which is necessary to make the change in saving equal to the change in investment.” The General Theory, pp. 183-4.

    2. pgl

      First of all the identity you are thinking about is:

      S – I = (G – T) + NX

      And it is just an identity. OK – suppose we had declining export demand (lowering NX) and fiscal austerity (lowering G – T).

      I guess one could pray for a private investment boom like we had in the late 1990’s. Then again – I do not see that as likely.

  4. Lord

    And investment down for the second month in a row. So much for the tax cut stimulating investment.

    1. pgl

      Lower investment and less net exports? I can hear Paul Ryan now – we need another tax cut! No, no, no – we need public infrastructure investment!

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