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February 6, 2018 | Trade Gap Surges, Mexico Overtakes Japan for 2017: Placing the Blame

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
The trade gap widened much more than expected in December. Imports and exports rose, with imports rising far more.

In what’s likely to negatively impact the next revision to fourth-quarter GDP estimates, the BEA’s report on International Trade for December shows the trade deficit widened sharply thanks to surging imports.

The deficit was larger than any Econoday economists’ estimate. The consensus was -$51.9 billion in a range of -$51.2 billion to -$52.7 billion.

3 Month Moving Average

Those looking for an acceleration in something cannot point to wages but they can point to trade deficits. The trade imbalance for the month surged to $53.1 billion.

2017 Summary

2017 Exports vs Imports

For 2017, the goods and services deficit was $566.0 billion, up $61.2 billion from $504.8 billion in 2016. Exports were $2,329.3 billion in 2017, up $121.2 billion from 2016. Imports were $2,895.3 billion in 2017, up $182.5 billion from 2016.

2017 China

For 2017, the deficit with China increased $28.2 billion to $375.2 billion. Exports increased $14.8 billion to $130.4 billion and imports increased $43.0 billion to $505.6 billion.

2017 Mexico

For 2017, the deficit with Mexico increased $6.7 billion to $71.1 billion. Exports increased $13.3 billion to $243.0 billion and imports increased $20.0 billion to $314.0 billion.

2017 Japan

For 2017, the deficit with Japan was essentially unchanged at $68.8 billion. Exports were $68 billion, imports $137 billion. Imports and exports each rose about $4 billion.

2017 EU

For 2017, the deficit with the European Union increased $4.7 billion to $151.4. Exports increased $13.9 billion to $283.5 billion and imports increased $18.6 billion to $434.9 billion.

Synopsis

  • 2017 Exports Up $121.2 Billion, Imports $182.5 Billion
  • 2017 Deficit Up $61.2 Billion
  • 2017 China Deficit $375.2 Billion, Up $28.2 Billion
  • 2017 Mexico Deficit $71.1 Billion, Up $6.7 Billion
  • 2017 EU Deficit $151.4 Billion, Up $4.7 Billion
  • 2017 Japan Deficit $68.0 billion, Unchanged

Trump Will Howl

Trump will howl over these numbers but the problem is entirely the United States’ making.

With US deficit spending rising, it takes capital imports to balance out. Trump’s tax plan increases the deficit so expect these numbers to worsen.

For discussion of the trade deficit math, please see Trump’s Tariffs Prove He’s “Clueless About Trade”.

Once again, the roots of this problem date back to August 15, 1971. That is when Nixon closed the gold window, ending foreign redemption of dollars for gold.

Mike “Mish” Shedlock

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February 6th, 2018

Posted In: Mish Talk

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