Analysis of current economic conditions and policy
Sick of “Winning”: Trade Deficit Edition
Since January 2017:
In levels:
As share of GDP (interpolated):
35 thoughts on “Sick of “Winning”: Trade Deficit Edition”
pgl
So as share of GDP, the trade deficit has remained close to 3%. Not winning for sure but at least the trade deficit/GDP ratio has not exploded. Can’t say the same about the government budget deficit.
PAUL MATHIS
The budget deficit and consumer spending are the reasons the economy is still growing. Balancing the budget would cause a recession immediately. Everyone knows this. Why pretend otherwise?
noneconomist
Not to worry. Next tax cut will pay for itself, National Debt will be paid off by 2024. The King of Debt said so.
PAUL MATHIS
Are you denying that the budget deficit is fuel for the economy? With inflation below target, what exactly is the purpose of reducing the deficit?
baffling
should we have reduced the budget deficit during the obama administration or the trump administration?
as a thought, if we are to believe trump, we are in the best economy the nation has ever seen. if that does not qualify for a budget deficit reduction, then there will never be a qualified time for such a reduction. or is trump wrong?
PAUL MATHIS
Based on unemployment and inflation rates, which used to be called the “Misery Index” we have the best economy in half a century.
Based on GDP growth, we are on the verge of recession and need more demand to keep the economy growing.
This is all Econ. 101, but everyone is pretending not to understand the role of the budget deficit in economic growth which has been documented conclusively over the past 7 decades, not to mention the 1930s.
What exactly would be the benefit of reducing the deficit now? In fact we should be taking advantage of low interest rates to upgrade our infrastructure which needs $3 trillion worth of work.
baffling
Paul, your argument is more valid for the obama years. Current slow growth is partially created by the self inflicted trade war. Should we continue to grow the deficit to pay for those recent tax cuts for the rich? Or silly trade wars? Why should the next generation pay for trumps mistakes today? Silly boomer logic.
Willie
“The King of Debt said so.”
He’s more the Fauntleroy of Bankruptcy.
Vasja
In the last few years, the debt to GDP ratio remained relatively stable due to a high economic growth. If growth declines revenue will decrease (less taxes in addition to those lost due to the reform) but the expenditure will remain stable or increase (due to automatic stabilizers and multiyear projects). This ratio can deteriorate quickly..
Vasja
I was commenting on the government deficit whereas figures display the trade balance. My mistake.
Bruce Hall
So, in the U.S. it’s much ado about nothing. https://www.bls.gov/cpi/ . Deficit isn’t much changed and consumer price index for all goods up about 2.5% yr./yr.
Strategically, as opposed to economically, this is what Trump really wants. He doesn’t see China as a trading partner, he sees it as a geopolitical adversary and doesn’t want the U.S. to participate in China’s growth.
pgl
Gee Brucie boy – China’s real GDP growth was 6%. That is over THREE times the US growth rate. And stupid you spins this as good news for the US and bad news for China???? You know a day without an incredibly dumb comment from you is like a day without sunshine. So thanks for the giggles!
pgl
“He doesn’t see China as a trading partner, he sees it as a geopolitical adversary and doesn’t want the U.S. to participate in China’s growth.”
OK Trump is almost as stupid as you are. Good to know!
2slugbaits
Bruce Hall Trump isn’t that smart. If he really had a strategic mind (which he doesn’t), then he wouldn’t have pulled out of TPP. And he certainly wouldn’t have pulled out of the nuke deal with Iran. His doing so has been a strategic gift to the Chinese. But let’s test your theory with actual data. As you can easily see, China’s GDP growth rate had been trending down for several years before Trump took office:
What the Forbes article didn’t tell you was that US companies are not relocating those jobs out of China and into the US. Trump wasn’t just promising rust belt workers that US firms would relocate to Vietnam, but that they would bring those jobs back to the Midwest. China’s growth is slowing for reasons that have nothing to do with Trump’s supposed strategic genius. Just like Trump is a military genius who knows all about catapults on aircraft carriers.
It’s funny how Trump’s re-election fund is buying its campaign materials from China.
PAUL MATHIS
If Trump had campaigned on bringing jobs back from China to Mexico, his low-education voters might have figured out the con. Mexico has been a big beneficiary of the China trade war, Ohio, not so much.
The Rage
Not really. Not a whole lot of jobs have relocated back to Mexico. Any that were, already had that in the plan before the mythical trade war. Much of the tariffs are being ignored. US consumers loaded up on debt for tariff stocking spending(which is the next mini-crisis to hit when consumer spending “collapses” again), especially on the left coast.
PAUL MATHIS
Consumers have not been hurt because China allowed the value of the yuan to fall against the dollar which offset the tariffs. The trade deficit with China has gotten worse under Trump.
A devaluation of 12.3% plus price reductions by Chinese manufacturers has negated most of Trump’s tariffs. Despite all the predictions higher consumer prices, consumers have not apparently been affected at all: 2Q2019 Core PCE is lower than 1Q2018
“[A} policy of trade restrictions is a treacherous instrument even for the attainment of its ostensible object, since private interest, administrative incompetence and the intrinsic difficulty of the task may divert it into producing results directly opposite to those intended.”
The General Theory, p. 339.
Case in point: Steel prices in the U.S. now are well below their level on March 1, 2018, when Trump announced his 25% steel tariffs. https://tradingeconomics.com/commodity/steel
While prices did rise initially to an interim high on July 11, 2018, they have since collapsed 45% as demand for American steel has fallen. http://steelbenchmarker.com/files/history.pdf
The conclusion, I think, is that the flexibility of American steel users, foreign exchange rates and enforcement of tariffs has negated Trump’s plan which has only resulted in a slowdown of world economic growth and trade. Hopefully, we won’t see a repeat of the effects of the Smoot-Hawley tariffs because businesses are much more adaptable and agile.
Steven Kopits
For the first time in decades, crude oil and refined products showed a trade surplus. Truly impressive.
Barkley Rosser
Yes, this is interesting, and I noted it on Econospeak. However, it involved both petroleum imports and exports declining last month, although with exports declining less than imports.
Frank
Hello Steven and petrol specialists,
I first alerted Econbrowser when Line 33 went negative on the Oct 4 report.
However, today (ending Week 11/1/2019 report), I noticed Line 33 is big positive:
If I recall correctly, I think Professor Hamilton has written several articles/papers about petroleum.
In the past few years, I have attempted to upgrade my math skills on edX by taking Differential Equations from BU and MIT. I always contribute to edX for courses I take, but anyone can take these excellent diffyq courses for free.
From what I understand, a number of simple physical petroleum models use a logistic model for depletion (that’s why I got up-to-speed with my elementary diffyq skills, so I could understand Professor Hamilton).
I think it is interesting times for the petrol specialists.
Cheers,
Frank
Julian Silk
Dear Frank and others,
This is just a question, not a point of view. Is there some sort of seasonal effect in the oil and natural gas numbers that may explain part of this decline in oil and natural gas purchases by the Chinese? Chinese thermal coal imports are up, according to
and it may be that there is some switching or a seasonal effect to explain this.
Julian
Frank
Hello Julian,
My knowledge of petroleum production is limited to intro diffyq textbooks.
In the Boston University introductory diffyq textbook, there is a section on modeling oil production with the logistic model: Lab 1.5, pages 149-150, Blanchard, et al, Differential Equations, 3rd edition, 2006.
I am not qualified to offer an opinion on the correctness/use of simple logistic mathematical models used for petroleum production or predict price of crude oil.
I remember reading a lot about peak oil in 2002-2008. There was/is a lot of interest in peak oil, so it was one of those things to put on my life-long learning to-do lists. Also on my life-long learning to-do list is economics of exhaustible resources. I think I have some of Professor Hamilton’s papers on my reading to-do list.
Cheers,
Frank
Moses Herzog
@ Frank
We need more of your intelligent comments here when you are not working on your to-do list, or not busy with work projects. Surely that time is limited, but we need more intelligent commenters to drowned out the bad ones on this blog.
One of the reasons you’re a great commenter is you don’t thrill in your own works. But don’t be shy to chip in here.
So as share of GDP, the trade deficit has remained close to 3%. Not winning for sure but at least the trade deficit/GDP ratio has not exploded. Can’t say the same about the government budget deficit.
The budget deficit and consumer spending are the reasons the economy is still growing. Balancing the budget would cause a recession immediately. Everyone knows this. Why pretend otherwise?
Not to worry. Next tax cut will pay for itself, National Debt will be paid off by 2024. The King of Debt said so.
Are you denying that the budget deficit is fuel for the economy? With inflation below target, what exactly is the purpose of reducing the deficit?
should we have reduced the budget deficit during the obama administration or the trump administration?
as a thought, if we are to believe trump, we are in the best economy the nation has ever seen. if that does not qualify for a budget deficit reduction, then there will never be a qualified time for such a reduction. or is trump wrong?
Based on unemployment and inflation rates, which used to be called the “Misery Index” we have the best economy in half a century.
Based on GDP growth, we are on the verge of recession and need more demand to keep the economy growing.
This is all Econ. 101, but everyone is pretending not to understand the role of the budget deficit in economic growth which has been documented conclusively over the past 7 decades, not to mention the 1930s.
What exactly would be the benefit of reducing the deficit now? In fact we should be taking advantage of low interest rates to upgrade our infrastructure which needs $3 trillion worth of work.
Paul, your argument is more valid for the obama years. Current slow growth is partially created by the self inflicted trade war. Should we continue to grow the deficit to pay for those recent tax cuts for the rich? Or silly trade wars? Why should the next generation pay for trumps mistakes today? Silly boomer logic.
“The King of Debt said so.”
He’s more the Fauntleroy of Bankruptcy.
In the last few years, the debt to GDP ratio remained relatively stable due to a high economic growth. If growth declines revenue will decrease (less taxes in addition to those lost due to the reform) but the expenditure will remain stable or increase (due to automatic stabilizers and multiyear projects). This ratio can deteriorate quickly..
I was commenting on the government deficit whereas figures display the trade balance. My mistake.
So, in the U.S. it’s much ado about nothing. https://www.bls.gov/cpi/ . Deficit isn’t much changed and consumer price index for all goods up about 2.5% yr./yr.
China, on the other hand… https://www.theguardian.com/world/2019/oct/18/chinas-quarterly-economic-growth-sinks-to-26-year-low-amid-us-trade-war
This seems to be the result that the administration really wanted.
China may not have gotten that particular message (playing “fair”), but they have gotten the message that U.S. companies are slowly moving out of China. Moreover, Chinese manufacturers who serve U.S. companies are also relocating. https://www.forbes.com/sites/kenrapoza/2019/10/18/trade-war-update-chinas-back-is-up-against-the-wall/#513d887c1ac1
Strategically, as opposed to economically, this is what Trump really wants. He doesn’t see China as a trading partner, he sees it as a geopolitical adversary and doesn’t want the U.S. to participate in China’s growth.
Gee Brucie boy – China’s real GDP growth was 6%. That is over THREE times the US growth rate. And stupid you spins this as good news for the US and bad news for China???? You know a day without an incredibly dumb comment from you is like a day without sunshine. So thanks for the giggles!
“He doesn’t see China as a trading partner, he sees it as a geopolitical adversary and doesn’t want the U.S. to participate in China’s growth.”
OK Trump is almost as stupid as you are. Good to know!
Bruce Hall Trump isn’t that smart. If he really had a strategic mind (which he doesn’t), then he wouldn’t have pulled out of TPP. And he certainly wouldn’t have pulled out of the nuke deal with Iran. His doing so has been a strategic gift to the Chinese. But let’s test your theory with actual data. As you can easily see, China’s GDP growth rate had been trending down for several years before Trump took office:
2010….10.64%
2011….. 9.60%
2012……7.86%
2013……7.76%
2014……7.31%
2015……6.92%
2016……6.70%
2017……6.80%
What the Forbes article didn’t tell you was that US companies are not relocating those jobs out of China and into the US. Trump wasn’t just promising rust belt workers that US firms would relocate to Vietnam, but that they would bring those jobs back to the Midwest. China’s growth is slowing for reasons that have nothing to do with Trump’s supposed strategic genius. Just like Trump is a military genius who knows all about catapults on aircraft carriers.
It’s funny how Trump’s re-election fund is buying its campaign materials from China.
If Trump had campaigned on bringing jobs back from China to Mexico, his low-education voters might have figured out the con. Mexico has been a big beneficiary of the China trade war, Ohio, not so much.
Not really. Not a whole lot of jobs have relocated back to Mexico. Any that were, already had that in the plan before the mythical trade war. Much of the tariffs are being ignored. US consumers loaded up on debt for tariff stocking spending(which is the next mini-crisis to hit when consumer spending “collapses” again), especially on the left coast.
Consumers have not been hurt because China allowed the value of the yuan to fall against the dollar which offset the tariffs. The trade deficit with China has gotten worse under Trump.
Paul Mathis: Empirical evidence suggests that import prices have largely risen in response to tariffs; see here.
Yuan versus Dollar
April 18, 2018 — 6.27/dollar
Nov. 01, 2019 — 7.04/dollar
https://fred.stlouisfed.org/series/DEXCHUS
A devaluation of 12.3% plus price reductions by Chinese manufacturers has negated most of Trump’s tariffs. Despite all the predictions higher consumer prices, consumers have not apparently been affected at all: 2Q2019 Core PCE is lower than 1Q2018
Paul Mathis: See this post.
Apparently Keynes was correct:
“[A} policy of trade restrictions is a treacherous instrument even for the attainment of its ostensible object, since private interest, administrative incompetence and the intrinsic difficulty of the task may divert it into producing results directly opposite to those intended.”
The General Theory, p. 339.
Case in point: Steel prices in the U.S. now are well below their level on March 1, 2018, when Trump announced his 25% steel tariffs.
https://tradingeconomics.com/commodity/steel
While prices did rise initially to an interim high on July 11, 2018, they have since collapsed 45% as demand for American steel has fallen.
http://steelbenchmarker.com/files/history.pdf
As a result, U.S. steel production is at the same level as 20 years ago. https://fred.stlouisfed.org/series/IPN3311A2RN#0
The conclusion, I think, is that the flexibility of American steel users, foreign exchange rates and enforcement of tariffs has negated Trump’s plan which has only resulted in a slowdown of world economic growth and trade. Hopefully, we won’t see a repeat of the effects of the Smoot-Hawley tariffs because businesses are much more adaptable and agile.
For the first time in decades, crude oil and refined products showed a trade surplus. Truly impressive.
Yes, this is interesting, and I noted it on Econospeak. However, it involved both petroleum imports and exports declining last month, although with exports declining less than imports.
Hello Steven and petrol specialists,
I first alerted Econbrowser when Line 33 went negative on the Oct 4 report.
However, today (ending Week 11/1/2019 report), I noticed Line 33 is big positive:
https://www.eia.gov/petroleum/supply/weekly/pdf/table1.pdf
If I recall correctly, I think Professor Hamilton has written several articles/papers about petroleum.
In the past few years, I have attempted to upgrade my math skills on edX by taking Differential Equations from BU and MIT. I always contribute to edX for courses I take, but anyone can take these excellent diffyq courses for free.
From what I understand, a number of simple physical petroleum models use a logistic model for depletion (that’s why I got up-to-speed with my elementary diffyq skills, so I could understand Professor Hamilton).
I think it is interesting times for the petrol specialists.
Cheers,
Frank
Dear Frank and others,
This is just a question, not a point of view. Is there some sort of seasonal effect in the oil and natural gas numbers that may explain part of this decline in oil and natural gas purchases by the Chinese? Chinese thermal coal imports are up, according to
https://www.spglobal.com/platts/en/market-insights/latest-news/coal/082619-chinas-july-thermal-coal-imports-jump-20-on-year-customs-data
and it may be that there is some switching or a seasonal effect to explain this.
Julian
Hello Julian,
My knowledge of petroleum production is limited to intro diffyq textbooks.
In the Boston University introductory diffyq textbook, there is a section on modeling oil production with the logistic model: Lab 1.5, pages 149-150, Blanchard, et al, Differential Equations, 3rd edition, 2006.
I am not qualified to offer an opinion on the correctness/use of simple logistic mathematical models used for petroleum production or predict price of crude oil.
I remember reading a lot about peak oil in 2002-2008. There was/is a lot of interest in peak oil, so it was one of those things to put on my life-long learning to-do lists. Also on my life-long learning to-do list is economics of exhaustible resources. I think I have some of Professor Hamilton’s papers on my reading to-do list.
Cheers,
Frank
@ Frank
We need more of your intelligent comments here when you are not working on your to-do list, or not busy with work projects. Surely that time is limited, but we need more intelligent commenters to drowned out the bad ones on this blog.
One of the reasons you’re a great commenter is you don’t thrill in your own works. But don’t be shy to chip in here.
Problem is that China has cut off the lucrative LNG export business we had developed.
https://www.reuters.com/article/us-usa-trade-china-lng/trade-war-cuts-u-s-liquefied-natural-gas-exports-to-china-idUSKCN1SG1YU
So not only are soybean farmers and lobstermen getting killed by Trump, even his oil and gas buddies are taking a huge hit.
They were never a huge buyer. They really didn’t cut off anything.
Also might be worth plotting against budget deficit
Uh-Oh….. Menzie is “Sick Again”
https://www.youtube.com/watch?v=lcEqU4Bmo64
“You know Factual numbers are the one you want….. factual numbers are the ones you need need need need!!!!!! Oh just a minute now…… [guitar solo]
(This song might sound much better after about 3/4 bottle of bourbon. Not that I had done anything like that years before.)
Moses,
What on earth has triggered this completely irrelevant and silly comment? This is worse than your usual by quite a large margin.
The trade war is a hoax in itself, run out of bejing. once that reality sets in, you have to sit and take it all in.
Huh? Trump started it and is proud of doing so. How is it that you are unaware of this?
Alternative facts.