By Kenneth Rapoza, CPA Industry Analyst
The Bureau of Economic Analysis released its monthly trade figures on Tuesday, showing a declining trade deficit with China, and some other key trading partners over the course of the year.
The goods trade deficit in August hit $83.9 billion, but on a year to date basis the goods deficit fell sharply from $589.9 billion in 2019 to $575.8 billion in the first eight months of 2020.
“Our goods deficit shrunk by $14 billion so far this year, showing that our trade policies are working, in spite of the virus’s ‘huge’ negative impact on the economy,” said CPA chairman Dan DiMicco.
On a monthly basis, the trade deficit in both goods and services hit $67.1 billion in August, up from $63.5 billion in July, as imports rose more than exports.
August data from the Bureau of Economic Analysis show that the China tariffs are working. Our goods deficit with China shrunk 5.7 percent to $29.8 billion in the month. On a year-to-date basis our China goods deficit was $193.1 billion for the January-August period, down 16.5 percent from the $231.2 billion in the year-earlier period. That’s after a 17.6 percent decline in the full year 2019.
US exporters sold $119.1 billion worth of goods internationally in August, a $3.5 billion increase from July, led by industrial supplies and materials. Overall, goods and services exports rose 2.2% on the month to $171.9 billion, but imports rose by 3.2% for a total of $239 billion.
One special feature of this year’s trade deficit increase is the rise of gold bar imports. A rise of some $22 billion in the year-to-date deficit numbers is attributable to nonmonetary gold imports which reflect actions by investment speculators and not underlying economic trends.
Trading Partner Deficits
Our deficit also shrunk with a number of other trading partners other than China.
Our year-to-date deficit with Japan is down 34.7 percent. Our year-to-date deficit with Canada is 35.6 percent smaller, and our deficit with Korea is down 6.7 percent.
BEA’s non-adjusted trade deficit with the EU so far this year stands at $113.6 billion, 5 percent smaller than the deficit for the same period in 2019.
Mexico is the largest trading partner to the US, and our deficit with our southern neighbor for August came in at $12.7 billion, up from $10.6 billion. Trade remains sluggish with Mexico as it battles back the coronavirus. US exports to Mexico fell in August to $17 billion from $18.4 billion in July and imports from Mexico were $29.8 billion in August, up a tad from $29 billion in July.
Still, August showed that the US runs deficits with nearly every nation. Our biggest surplus for the month was with Hong Kong, at $1.5 billion, up from $1.2 billion in July. It was $2 billion in August 2019.
What We’re Exporting
US trade figures show a continued surplus in agricultural commodity exports, with exports hitting $11.1 billion in August versus $10.3 billion in July (Exhibit 15), while manufactured goods remain in a deficit. Manufactured goods exported in August were valued at $79.3 billion versus $75.3 billion in July. Imports of manufactured goods for August stood at $181.6 billion, up from $180 billion in July.
Crude oil exports rose only slightly in August by volume, with the US shipping 100.8 million barrels versus 100.4 million in July. Both months are better than August and July volumes in 2019. Crude oil exports were valued at $4.2 billion, up from $4 billion in July. Most of that oil stays within North America.
We often think of the US as a leader in advanced technology. But our trade balance in this sector is also negative. For August, the trade deficit in advanced tech was $19 billion, the highest on the year and the highest monthly deficit in the last two years, as reported by the BEA today. The US has a $113.1 billion deficit in the advanced technology goods trade as of August.
In the advanced tech space, aerospace leads with an August trade surplus of $3.1 billion based on August exports of $5.8 billion. The biggest deficit is in information and communications systems equipment at $16.2 billion. Other sectors dominated by China, namely optical equipment, had a $2.1 billion deficit with exports of $321 million in August.
China accounts for around $8.1 billion of the deficit in advanced technologies, followed by Mexico at $3.05 billion.
Some key items in the news: soybean exports rose to $2.2 billion from $1.2 billion in August as harvest season begins. Still, soy exports are down $2.5 billion year-to-date versus 2019 to $11.4 billion.
On a year-to-date basis for manufactured goods, only semiconductors stood out. Exports are up by $3.8 billion year to date to $36.4 billion, with August shipments valued at $4.1 billion, down from $5.3 billion in July.
The US automotive sector is still reeling from the pandemic with exports down $31.5 billion as of August to $77.7 billion overall. Passenger car exports slipped to $4.5 billion in August from $4.6 billion. Imports beat. The US imported $12.4 billion worth of passenger cars in August, up from $11.4 billion in July.
Pharmaceutical goods exports totaled $5 billion in August, down from $4.8 billion in July. All told, the US imported $14.5 billion worth of pharmaceutical goods in August, up from $11.8 billion in July. Year-to-date, we exported $38.3 billion worth of pharmaceutical goods year-to-date ending in August, compared with exports last year over the same 8 month stretch of $40.4 billion. On the import side so far this year, pharmaceuticals tallied at $108.7 billion. Last year at this time, the US imported $98.7 billion worth of pharma goods.