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Fall in US Trade Balance Led by Ag. Exports

Summary:
September 27, 2018 — As of July, the US trade deficit had widened relative to  a year ago, despite temporary improvement earlier in 2018.  A new Census report today suggests: (1) further deterioration of the merchandise trade balance in August, and (2) a particular role for exports of food & feeds which, after rising in the spring, have apparently fallen sharply since June: -6.3 % in July and -9.5 % in August.  [Advance Economic Indicators, Sept. 27, 2018, Table 1. U.S. Intl. Trade by End-Use Category].  This is consistent with the story that retaliatory Chinese tariffs against US exports of soybeans and other farm products caused shipments to be moved forward to beat the July 1 deadline. But the overall trend in the US trade balance since the advent of Trump appears to be negative.

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September 27, 2018 — As of July, the US trade deficit had widened relative to  a year ago, despite temporary improvement earlier in 2018.  A new Census report today suggests: (1) further deterioration of the merchandise trade balance in August, and (2) a particular role for exports of food & feeds which, after rising in the spring, have apparently fallen sharply since June: -6.3 % in July and -9.5 % in August.  [Advance Economic Indicators, Sept. 27, 2018, Table 1. U.S. Intl. Trade by End-Use Category].  This is consistent with the story that retaliatory Chinese tariffs against US exports of soybeans and other farm products caused shipments to be moved forward to beat the July 1 deadline.

But the overall trend in the US trade balance since the advent of Trump appears to be negative. This is  not surprising in light of the recent appreciation of the dollar (not just against the RMB but against most currencies), which can in turn be attributed to Trump’s  own tax cuts and other policies.  CA=NS-I.  Watch for trade balance statistics Oct. 5.  We are nearing the all-time US record deficit (2008: $832 billion for the year in goods alone or $709 billion if you count also services, as you should).

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Jeffrey Frankel
Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers. He directs the Program in International Finance and Macroeconomics at the US National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, the official US arbiter of recession and recovery.

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