Enormous, Humongous August Trade Deficit Welcomes TPP

Dave Johnson

The U.S. Census Bureau reported Tuesday that the August goods and services trade deficit was an enormous, humongous $48.3 billion. This is a big 15.6% increase from July’s enormous, humongous $41.8 (revised) billion trade deficit.

Exports dropped 2 percent and imports rose 1.2 percent.

The monthly U.S. goods deficit with China rose in August to an enormous, humongous $32.9 billion from an enormous, humongous $30.6 billion.

The U.S. goods deficit with Japan was down a bit to $5.2 billion in August.

The U.S. goods deficit with South Korea was $2.7 billion in August.

U.S. exports of goods and services fell to $185.1 billion. This is the lowest level since October 2012.

“Horrible” For Economy

The Business Insider report, “Trade deficit balloons to $48.3 billion,” explains what this means for the U.S. economy,

“In one line: Horrible; trade is set to be a significant drag on Q3 GDP growth,” wrote Pantheon Macroeconomics’ Ian Shepherdson in a client note.

The reasons for this terrible trade report are clear: our trade policies. We have a strong and rising dollar, which means things made here cost more so they are less competitive in international markets. This is partly a result of China’s big devaluation (see “What Is Currency Manipulation?“) We don’t do anything about currency manipulation, which hurts U.S. manufacturers. A “strong” currency is great if you hold dollars, terrible if you want to sell stuff made here. But our trade deficit is not just caused by currency rates, it is also the result of other US policies that favor Wall Street and outsourcers over domestic manufacturers.

Which brings us to the Trans-Pacific Partnership agreement (TPP).

TPP and Currency Manipulation

Negotiators announced a deal to complete the TPP on Monday. TPP is still secret but leaks inform us that it does not include enforceable measures against currency manipulation. It also apparently incentivizes companies to outsource to low-wage countries like Vietnam.

Then next we receive a terrible trade deficit report – the result of our trade policies to date. These trade policies are designed to deindustrialize the U.S., moving factories and jobs to low-wage countries, so America’s “investor” class can pocket the wage differential for themselves. Inequality is soaring as a result, as the lost jobs are replaced by low-wage jobs for those lucky enough to find work.

The enormous, humongous and ongoing trade deficit, month after month, year after year, drags down our economy. Yet our news media is barely informing the public of the relationship between the trade deficit and our economic woes.

In this election season our news media has not been connecting the dots and giving trade policy the coverage it deserves. To the extent it has gotten onto the media agenda, it is largely because Donald Trump (on the right) and Bernie Sanders (on the left) have used the issue to draw major grassroots support for their presidential campaigns. Now that the TPP is coming to the Congress – a real treaty that will face concrete congressional debate – will the major media bring these issues closer to the front of the political discussion?

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