Our new president is against him, the unions despise him and the unemployed blame him. And not without reason. The US has done less than great on trade, jobs and economic growth.
Let’s take a look at the data, but then dive into the nuances a little. A bluff that isn’t aimed at reducing the trade deficit and creating jobs is likely to stumble upon this nuance. On the other hand, an understanding of economic complexity must go hand in hand with courageous action.
So let’s dive in.
US Performance – Trade, Jobs, and Growth
For authenticity, we turn to (it seems) unbiased and authoritative sources. For the trade balance we use the ITC, the International Trade Commission, in Switzerland; for employment in the US, we use the US BLS, Bureau of Labor Statistics; and for the macroeconomic data of the countries we describe in the World Bank.
According to the ITC, the United States accumulated a goods trade deficit of $ 802 billion in 2015, the largest deficit of any country. This deficit exceeds the total deficit of the next 18 countries. Deficits do not represent deviations; The U.S. goods trade deficit averaged $ 780 billion for the past 5 years, and we have been in deficit for the past 15 years.
The goods trade deficit affected key sectors. In 2015, consumer electronics ran a deficit of $ 167 billion; Clothing $ 115 billion; $ 74 billion in equipment and furniture; and cars $ 153 billion. Some of these deficits have increased significantly since 2001: consumer electronics by 427%, furniture and appliances by 311%. In terms of imports to exports, clothing imports are ten times as high as exports, and consumer electronics are three times as high; Furniture and equipment 4 times.
Cars have a small silver lining, the deficit has risen relatively moderately by 56% in 15 years, about the same as inflation plus growth. Imports exceed exports a worrying but relatively modest 2.3 times.
In terms of employment, the BLS reported a loss of 5.4 million U.S. manufacturing jobs from 1990 to 2015, a decrease of 30%. No other important professional groups have lost their jobs. The four states in the Belt region together lost 1.3 million jobs.
The US economy is stumbling forward. Real growth over the past 25 years has averaged just over two percent. Most of the income and wealth gains during this period have landed in the upper income bracket, causing much of America to feel stagnant and miserable.
The data paints a sad picture: the US economy is plagued by a sustained trade deficit, manufacturing job losses and weak growth. This picture shows – at least at first glance – one element of the solution. Fight against the flood of imports.
Added perspective – unfortunately complexity
Unfortunately, economics seldom succumbs to simple explanations; Complex interactions are often based on dynamics.
So let’s take an additional perspective.
While the United States ran the largest deficit in goods trade, it did not rank first as a percentage of gross domestic product (GDP). On this basis, our country achieves around 4.5%. The UK had a goods trade deficit of 5.7% of GDP; India 6.1%, Hong Kong 15% and United Arab Emirates 18%. India has grown an average of more than 6% a year over the past quarter century, and Hong Kong and the United Arab Emirates are slightly better than 4%. Turkey, Egypt, Morocco, Ethiopia, Pakistan have trade deficits in about 50 countries in goods as a group, averaging 9% of GDP but growing at 3.5% per year or better.
Notice the term trade deficit. Merchandising encompasses material goods – cars, smartphones, clothing, steel. Services – law, finance, copyright, patents, computers – represent another group of goods that are intangible, that is, difficult to hold or touch. Here the USA achieved a trade surplus of 220 billion US dollars, the largest of all countries, which partially offsets the goods trade deficit.
The trade deficit also covers the gross value of trade in dollars. The trade balance equals exports minus imports. Of course, imports represent goods that are not produced in one country and have partly lost their jobs. On the other hand, exports represent the dollar value of what needs to be produced or supplied, and thus the jobs created. Both Exports rank the US first for services and second for goods with a combined export value of $ 2.25 trillion per year.
We are trying here not to prove that our trade deficit is good or has no negative impact. But data weakens our perspective.
Firstly, we can see from the example of India that the trade deficit is not inherent in that it limits growth. Countries with a larger GDP deficit than the US grew faster than the US. And below we will look at examples of countries with trade surpluses that are not growing rapidly, which in turn confirms the conclusion that growth is directly related to the trade balance.
Second, given the importance of exports to US jobs, we do not want measures to reduce our trade deficit to secondarily limit or impede exports. This is most critical when imports exceed exports to a lesser extent; Efforts here to reduce the trade deficit and to find jobs could result in even greater job losses in exports.