There was (yet more) bad economic news this morning. Reuters: US trade deficit grows to 31-month high. While oil takes part of the blame, the problem is not all oil:
Oil imports helped widen the U.S. trade deficit to $50.2 billion in May from $43.6 billion in April, pushing the gap to its highest level in 31 months, according to Commerce Department figures.
The trade deficit with China also grew, increasing by more than 15 percent to $25 billion. U.S. companies imported $32.8 billion worth of goods and services from China, but only exported $7.8 billion in goods and services to China.
. . . U.S. exports decreased by 0.5 percent to $174.9 billion as overseas demand for U.S.-made goods and services decreased while U.S. demand for foreign-made goods and services increased.
So when there is any improvement in our economy, much of the benefit just goes out of the country.
In its report, U.S. Trade Deficit Unexpectedly Surges on Oil, Bloomberg writes,
The deficit may narrow as the recent drop in oil costs and a slowdown in consumer spending curb imports, indicating trade will help prop up the world’s largest economy.
. . . The trade gap was projected to widen from an initially reported $43.7 billion in April, according to the median forecast of the economists surveyed by Bloomberg. Estimates ranged from deficits of $40 billion to $48 billion. The Commerce Department revised the April shortfall to $43.6 billion.
Scott Paul, of the Alliance for American Manufacturing (AAM) issued this statement, worth reading in its entirety:
The $50 billion trade deficit is a sign that something is terribly wrong with the American economy. The enormous $25 billion trade deficit with China is a sign that something is terribly wrong with the American political system.
Anyone who thinks this trade deficit is the product of market forces needs to get their head out of a dusty old textbook and take a look around at the real world. China’s exchange rate manipulation, industrial subsidies, state-owned enterprises, and weak regulations set the stage for this mess. But our government’s refusal to stop China’s cheating has made it worse.
Congress could do something today to begin to turn the tide: pass bipartisan legislation to deter China from manipulating its currency. There is no good excuse for Congress to delay action—the bill attracted 99 Republican votes last year; it will reduce the budget deficit, grow American jobs, and reduce China’s foreign reserves. So will Congress heed the wishes of Beijing and allow currency manipulation to continue unabated, or will it stand by American workers and businesses who only want a level playing field?
The Administration has failed to hold China to account, as well. The Treasury Department has let China off the hook five consecutive times by refusing to name it as a currency manipulator, despite overwhelming evidence to the contrary. This is simply inexcusable.
Washington needs to understand that our trade deficit represents a drain on jobs and federal revenues. Balancing our trade account is possible with the right kind of leadership, and it would have a positive impact on economic growth and our fiscal position. America’s economic leadership is at stake.