US Trade Deficit Increases as Trade Flows Show COVID-19 Effect (UpDate)

US Trade Deficit Increases as Trade Flows Show COVID-19 Effect (UpDate)

#trade #deficit #dollars #Covid #gold

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The Trump Trade Deficit Increases Even as Trade Flows Show COVID-19 Effect, Dropping 15% in 1-H of Y 2020 Compared to Same Frame in Y 2019” –Paul Ebeling

The trade deficit widened to $67.1-B in August (consensus -$66.2-B) from an revised $63.4-B in July. The widening deficit is a function of imports increasing more than exports.

  • The Key takeaway from the report is the understanding that it reflects a pickup in trade activity from the China virus chaos lows, yet it is also a reminder of just how damaging the chaos has been on trade activity. Y-Y, average exports decreased $44.8-B from the 3 months ending August 2019 while average imports decreased $34.7-B.

The US trade deficit in 1-H of President Donald Trump’s 4th yr in office is 6.5% higher than in the same frame in Hussein Obama’s last year, despite a 15% overall fall-off in trade flows related to the global coronavirus chaos, the latest trade data released by the US Census Bureau shows.

COVID-19’s chaos reduced trade worldwide, so the fact that President Trump’s trade deficit is larger than  the same period in the last year of the Hussein Obama administration shines a light on President Trump’s failure to ‘eliminate’ the trade deficit, which he promised as a candidate in Y 2016, we can assume he is working on it, as he is the promises made promises kept President.

The new US Census Bureau trade data showed that:

  • The effects of the COVID-19 chaos on commerce in general and trade specifically are evident in 1-H of Y 2020 data: However, despite the 15% overall drop in trade flows, the US trade deficit in 1-H of Y 2020 was only down 9% relative to the same frame in Y 2019. This is in part because imports from Mexico have begun to rise significantly under the new agreement.
    • Total US goods and services exports in 1-H of Y 2020 were $1.066-T relative to $1.266-T of Y 2019. Imports in 1-H of Y 2020 were $1.341-T Vs $1.563-T in Y 2019.
  • The 6-month 2020 trade deficit is 6.5% higher than the deficit for Y 2016, the year before President Trump took office, even as the COVID-19 chaos reduced the deficit 9% compared to the 1st 6 months of Y 2019. Comparing 1-H of Hussein Obama’s last year in office, the overall trade deficit increased 6.5%, rising from $257 to $274-B in inflation-adjusted terms.
    • The overall US goods and service trade deficit with the world dropped 9% in 1-H of Y 2020 relative to the same frame of Y 2019 from $301 to $274-B in inflation-adjusted terms.
    • The US trade deficit in goods decreased 7.5% in inflation-adjusted terms from $446-B in the 1st 6 months of Y 2019 to $412-B in the same frame of Y 2020. However, the trade deficit in goods during these months is still 3% higher than the 1 experienced in the same frame of Y 2016, rising from $399 to $412-B in inflation-adjusted USDs.
  • The China deficit is down relative to Hussein Obama’s last year, but there is a “trade diversion” effect of imports increasing from other countries.
    • The trade deficit with China decreased 22% in inflation-adjusted terms going from $169-B in 1-H of Y 2019 to $132-B in 1-H of Y 2020. It is also smaller compared to Y 2016, when in inflation-adjusted dollars, it was $173-B for January to June.
    • In inflation-adjusted USDs, the goods trade deficit with the rest of the world sans China increased from $277 to $280-B in 1-H of Y 2020 relative to the same frame in Y 2019.
  • The deficit with North American Free Trade Agreement (NAFTA) partners is 11% higher in the 1-H of Y 2020 relative to the same frame in HusseinObama’s last year in office but down relative to Y 2019 even as Mexican exports to the US began to expand significantly in June.
    • The NAFTA deficit in the 1st 6 months of Y 2020 was $97-B, 11% higher than the same frame in Y 2016 when it was equivalent to $88-B in inflation-adjusted USDs.
    • The goods trade deficit with NAFTA parties decreased by $19-B in inflation adjusted terms compared to the same frame in Y 2019, largely because of measures taken to prevent the spread of COVID-19.
    • Even as the COVID-19 chaos narrowed the trade deficit with NAFTA parties during 1-H of Y 2020 compared to Y 2019, the reduction was not as large as expected given a jump in Mexican exports in June. More than 80% of Mexican goods are destined for the US market.  According to the data released by Mexico’s statistics authority, overall Mexican exports grew 75.5% in June relative to May. This resulted in Mexico posting a 6-month January to June surplus of $2.6-B even as Mexican exports decreased overall 12.8% compared to June 2019. Mexican imports also dropped almost 10% more in the same frame (22.2%)

Gold futures settled 12.50 higher (+0.7%) at 1,920.10oz.

Monday and like equities, the gold market likes easy money from the Fed + big deficit spending by government is going to win out over COVID’s deflationary impact.

Always take what the market gives, and this scenario presents many opportunities.

To me as a business resurgence expert, I am not worry about our trade deficit. Substantial improvement will be seen as more American businesses return home and we continue with our energy self-sufficiency plus tariff protectionism. Time is on our side as the US Dollar smartly continues to fall which can only help the American worker and a solution for a reasonable costs vaccine becomes consumer accepted. Further, we will be better able to handle on foreign debt plus our economic recovery will result  in a cheaper and more beneficial US Dollar.

As an economist, our revenue base will continue to rise as our economy returns to its pre-covid status. This will mean more exporters, more employment and thus increased revenues with the focus of being Buy American!

We are on the right track which if we are smart it will continue. However, expect our federal deficits continue to grow as our economy continues to heal itself. That answer will in all likely be yes for Congress still does not know fiscal restraint or control. Hopefully, that will change our mindset too for we can not continue with our free-wheeling generosity as a Nation.

So, patience is the prescription of the day as we return our industries to that of the yesteryears,” says Bruce WD Barren, a World accepted business recovery expert.

Have a healthy day, Keep the Faith!

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Paul Ebeling

Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he it the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.