President Trump And His Trade Policies

Yesterday Fox News reported that the US trade deficit has dropped for first time in 6 years because of the taxes President Trump has placed on China.

The article reports:

The U.S. trade deficit fell for the first time in six years in 2019 as President Donald Trump hammered China with import taxes.

The Commerce Department said Wednesday that the gap between what the United States sells and what it buys abroad fell 1.7 percent last year to $616.8 billion. U.S. exports fell 0.1 percent to $2.5 trillion. But imports fell more, slipping 0.4 percent to $3.1 trillion. Imports of crude oil plunged 19.3% to $126.6 billion.

The deficit in the trade of goods with China narrowed last year by 17.6 percent to $345.6 billion. Trump has imposed tariffs on $360 billion worth of Chinese imports in a battle over Beijing’s aggressive drive to challenge American technological dominance. The world’s two biggest economies reached an interim trade deal last month, and Trump dropped plans to extend the tariffs to another $160 billion in Chinese goods.

The article notes:

Overall, the United States posted a $866 billion deficit in the trade of goods such as cars and appliances, down from $887.3 billion in 2018. But it ran a $249.2 billion surplus in the trade of services such as tourism and banking, down from $260 billion in 2018.

America is a nation of consumers, so I suspect trade deficits are something that will always be with us, but as the manufacturing base in America expands and our trade policies become more balanced, I believe we will see lower trade deficits.

Good Economic News Created By Good Leadership

Trading Economics reported the following:

The US trade deficit narrowed to $43.1 billion in November 2019 from a downwardly revised $46.9 billion gap in the previous month. It compares with market expectations of a $43.8 billion shortfall. The trade gap shrank for the third straight month to the lowest since October 2016. Imports slumped 1% to the lowest value in 2 years due to falling purchases of aircraft, computers and cell phones. Exports increased 0.7% to $209 billion, boosted by sales of drilling and oilfield equipment, jewellery, autos, diamonds and aircraft engines. The goods trade deficit with China narrowed 15.7% to $26.4 billion, with imports dropping 9.2% and exports jumping 13.7%. Year-to-date, the total deficit decreased $3.9 billion. The trade war with China seems to be the main cause behind the lowest trade gap. Although a lower trade deficit is likely to impact positively on GDP growth, concerns remain over the impact of falling imports in consumer spending, the largest component of GDP. Balance of Trade in the United States averaged -15090.59 USD Million from 1950 until 2019, reaching an all time high of 1946 USD Million in June of 1975 and a record low of -67823 USD Million in August of 2006.

This is the result of the tariffs and trade negotiations of President Trump.

The Latest Economic Numbers

On Friday, Market Watch reported that the U.S. economy did better than expected during the first three months of 2019.

The article reports:

Reports of the demise of the U.S. economy proved unfounded as first-quarter activity showed surprising strength. The U.S. economy expanded at a 3.2% annual pace in the first three months of 2019, the government said Friday.

The gain was well above forecasts. Economists polled by MarketWatch had forecast a 2.3% increase in gross domestic product. The economy grew at a 2.2% rate in the final three months of 2018.

Inflation moderated a bit in the first quarter.

The article includes other good economic news:

Final sales to domestic purchasers, which excludes trade and inventory behavior, rose 2.3% in the first quarter, the smallest gain in three years, but still well above what economists were expecting.

The value of inventories increased to $128.4 billion from $96.8 billion, adding to GDP.

The trade sector added a little more than 1% to growth in the first quarter. Exports rose 3.7%, while imports dropped by the same amount, leading to a smaller trade deficit.

Offsetting these gains, consumer spending decelerated to a 1.2% gain, the slowest increase in a year.

Business fixed investment decelerated to a relatively slow 2.7% gain, down from a 5.4% gain in the prior quarter. Investment in structures fell 0.8%, the third straight decline.

Investment in new housing was another weak spot. Residential investment dropped 2.8%, the fifth straight quarterly decline.

I believe that the weakness in the housing market is being caused by a number of things. The millennials, the generation that would currently be entering the housing market, are weighed down by student debt. There is also a different attitude among young Americans about owning a house that there was a few generations ago. In the past, many Americans looked at their home as an investment–something that would grow in value over the years. Many older people began with a ‘starter house’–a small house that allowed them to enter into the housing market. Today, couples are having children later than previous generations. Their first house is paid for by two incomes, and they are not dealing with the expense of having children. The concept of a ‘starter house’ is no longer with us. Those facts, along with the price of the home most young people want to own are working to slow down the housing market. I am not convinced any of those factors are going to change.

Even The Good News Is Clouded With Doom When The Media Reports It

Market Watch posted an article yesterday about the January trade deficit in America. The article notes that the deficit shrank to $51.1 billion in January from almost $60 billion in December. That is really good news. However, the media doesn’t seem to want good economic news.

The article notes:

Economists polled by MarketWatch had forecast a $57.7 billion deficit.

Notice that they were more than a little off.

The article continues:

The lower U.S. trade deficit, if it persists, could provide a small boost in the first quarter to gross domestic product, the official scorecard of the economy. But the drop in imports could also be taken as sign of softening demand in the U.S. that adds to worries about a slower growth.

Whatever the case, the U.S. is coming off the highest annual deficit in a decade and it’s unlikely the gap will shrink much if at all in 2019.

The President is renegotiating trade deals. This is not an ‘instant’ process. His negotiating skills and business acumen are responsible for the growing economy–the unemployment rate is down and the workforce participation rate is up. Can someone in the media please give President Trump a little credit and show a little optimism.