The U.S. Census Bureau reported Friday that the December goods and services trade deficit was an enormous, humongous $43.4 billion. Imports were up, exports were down.
The cause was a “stronger” dollar, decreased demand around the world thanks to “austerity” policies that take money out of economies, and, of course, our job-killing “free trade” policies.
The 2015 goods and services deficit added up to $531.5 billion. This was $23.2 billion (4.6 percent) more than 2014.
The goods and services trade deficit with China was a record $365.7 billion in 2015. That represents a billion dollars worth of jobs shipped to China every single day for a year.
The total, the yearly 2015 goods deficit was $758.9 billion. (Services ran a surplus.) The 2015 trade deficit in manufacturing was $831.4 billion, a 13.2 percent increase from 2014.
Imagine the resulting jobs, pay increases and middle-class prosperity if U.S. factories had those $831 billion in orders, instead of China and elsewhere. Imagine the ripple-out effect as people shopped in stores, paid taxes, paid down debts or increased their savings.
Strong Dollar Mean U.S. Goods Cost More In World Markets
The U.S. has a “strong dollar” policy. This makes goods made in the U.S. cost more in world markets. Meanwhile other countries manipulate currency markets to “weaken” their own currencies (and we don’t stop them). As a results, goods imported from those countries cost less. Reuters reported, in U.S. trade deficit widens as exports fall:
The dollar gained 9.2 percent against the currencies of the United States’ main trading partners last year, eroding the appeal of U.S.-made goods overseas. Lackluster global demand also has put a damper on exports.
Trade subtracted almost half a percentage point from gross domestic product in the fourth quarter, helping to hold down growth to a paltry 0.7 percent annual rate. It is largely expected to remain a drag in the first quarter.
A strong dollar, high interest rate and low wage policies drain the manufacturing sector but boost Wall Street. What Wall Street wants, Wall Street gets.
Trade Out Of Balance – For Decades
The balance of trade is a way to measure gain or drain from the economy. As Reuters reported (above) the trade deficit cut half a percent from growth in the last quarter. A continuing trade deficit (ours has continued since the ascendance of neoliberal Wall Street “free trade” policies in the late 1970s) means that jobs, wealth and the economic ecosystems that enable a country to thrive (or at least make a living) are disappearing.
This record deficit comes even as the “free trade” deals that led to them were promoted as creating jobs and boosting GDP. But even one of the architects of our trade deficit just came out against the Trans-Pacific Partnership (TPP). Former U.S. trade representative (USTR) Sen. Rob Portman (R-Ohio) is in a race for reelection. TPP is enormously unpopular, especially in Ohio, which has seen entire regions devastated by the loss of jobs and factories, now says he won’t accept the current TPP. The Hill reports, in “Vulnerable senator comes out against Obama trade pact“:
“From currency manipulation, to rules of origin for automobiles, to protection for U.S. biologics — we can do better,” said Portman, who served as U.S. Trade Representative under former President George W. Bush.
“I cannot support the TPP in its current form because it doesn’t provide that level playing field,” he added.
Scott Paul, president of the Alliance for American Manufacturing, on the record trade deficit with China:
“Now we have even more evidence as to why voters are deeply concerned about China and its impact on the American economy. Our trade deficit with China in 2015 again surged to record levels, and that helps explain the struggles we’ve seen in manufacturing recently – particularly in critical sectors like the steel industry.
“The 29,000 factory jobs gained in January is good news, but it’s certainly no indication of an upward trend. Many dangers persist, including a strong dollar, China’s economic weakness, and its massive industrial overcapacity. It strikes me as an inopportune time to be pushing a Trans-Pacific Partnership that is projected to cost America more than 121,000 factory jobs, according to the Peterson Institute of International Economics.
“And until the president and Congress get serious about balancing our record trade deficits with China, and insist that Beijing honors all of its trade obligations, American factory workers will continue to struggle.”
Michael Stumo, CEO of the Coalition for a Prosperous America, on TPP relative to past trade agreements:
“The US International Trade Commission is drafting a report projecting the likely jobs, growth and trade balance impact of the Trans-Pacific Partnership (TPP), if implemented. The Commission needs to determine why its past trade agreement reports projected far better trade performance than we actually experiences, and correct those drastic errors, before releasing any report on the TPP.”