On October 6, 2020, Ambassador Robert Lighthizer issued the following statement concerning the August 2020 trade data released by the U.S. Department of Commerce:
“The trade data released today reflect the effects of the coronavirus on the U.S. and our trading partners. Basically, many of our partners were more negatively affected by the pandemic than we were. Indeed, the U.S. economy has outperformed every other G7 country. In spite of the pandemic, our goods deficit is down 2.4% year-to-date. The goods deficit would have decreased by at least 6% but for a large spike in gold imports reflecting risk-hedging strategies during the pandemic, not underlying economics. Our services surplus is down 19%, but that is largely due to reduced tourism, travel, and transport. As other countries recover and reopen, we expect both imports and exports to improve substantially.”
“Additionally, it is worth noting that our year-to-date goods deficit with China is down 16.5%, and is likewise down with Japan (34.7%), the EU 27 (7.7%), and Korea (7%). In the USMCA countries, the U.S. deficit with Canada is down 36% this year and Mexico’s surplus is slightly up due to their economic downturn’s effect on their demand for our exports."
“Overall, the Trump trade policy is working in spite of the virus. It is worth remembering that before the fallout from the pandemic, our goods trade deficit had been down from the previous year in five of the last six quarters, 7.2 million jobs had been created since the election—including over 510,000 manufacturing jobs—and median family income had increased by 6.8% in 2019, the largest increase in U.S. history.”
Key Points
• The trade deficit increased in August because America’s economy has recovered more quickly than our trade partners’. Because of President Trump’s leadership, coronavirus has had a smaller effect on our economy than any other G7 nation. U.S. GDP is down 9% from a year ago compared to 21.5% for Britain, 18.9% for France, 17.7% for Italy, 13% for Canada, 11.3% for Germany, and 9.9% for Japan. Since May, U.S. exports and imports have both begun to rebound, but imports have recovered more quickly. With that said, U.S. goods exports still increased from $90 billion in May to $119.1 billion in August, a 32% increase.
• The trade deficit was shrinking before the pandemic. The U.S. goods trade deficit fell by $16 billion in 2019 and has been down from the previous year in five of the last six quarters.
• This year’s trade deficit increases have been driven by imports of gold bars. Of the $22.6 billion year-t0-date increase in the trade deficit, $22 billion is attributable to a spike in non-monetary gold imports, which reflect risk-hedging strategies by traders and investors during the pandemic and not underlying economics.
• The trade deficit with China is shrinking as the Phase One Deal continues to take effect. In August, the trade deficit with China fell $1.9 billion as exports to China rose and imports remained level. Year-to-date, the goods trade deficit with China also decreased by $38.2 billion (16.5%) from the same period in 2019.
• Overall job growth and manufacturing job growth were strong prior to the pandemic. Between November 2016 and February 2020, the Trump economy added more than 7.2 million jobs, including over 510 thousand manufacturing jobs. The unemployment rate had also fallen from 5.1% in November 2016 to 3.5% in February 2020, a 50-year low.
• Middle class income was surging prior to the pandemic. In 2019, median household income rose by over $4,300 (6.8%) – the largest annual increase on record and nearly 50 percent more than during the entire eight years of the Obama Administration ($3,021).
• Manufacturing wages have continued to rise, despite the pandemic. Average hourly earnings for production and nonsupervisory employees in manufacturing rose by 11.4% between November 2016 and September 2020.
• The U.S. has already regained over half of the jobs that were lost due to the pandemic, including over half of the manufacturing jobs. This year saw the four best months for job growth since the government began tracking the data in 1939: 4.8 million jobs in June, 2.7 million in May, 1.7 million in July, 1.4 million in August. In September, the economy added an additional 661,000, still the highest numbers since September 1983 if you exclude May-August. These numbers include 716,000 manufacturing jobs regained since April. Despite the CBO forecasting an unemployment rate of 16 percent in the third quarter of 2020, the rate has already fallen to 7.9 percent, down from 14.7 percent in April.
