By Kenneth Rapoza, CPA Industry Analyst
The November trade deficit in goods and services rose 8% to $68.1 billion November, its highest since 2006 even as the US trade deficit in goods hit $85.5 billion, its highest on record.
Our monthly goods deficit with China was only 1.9 percent up on the October figure, and our year-to-date goods deficit with China continues to be down dramatically versus 2019, showing that the Section 301 China tariffs are reducing our dependence on imports from China.
The trade deficit in goods and services hit $68.1 billion in November, a significant rise from the $63.1 billion in October as holiday seasonal demand picked up.
Our goods deficit for the first 11 months of the year reached $814.7 billion. Once December data arrives, our 2020 goods deficit is highly likely to be over $900 billion, which would make it the highest ever, beating out the 2018 figure of $872 billion and the $828 billion reached in 2006 during the early-2000s economic boom. A $900 billion goods deficit represents about 4.2 percent of US gross domestic product, in other words 4.2 percent of demand from US purchasers lost to imports.
See monthly CPA trade data here.
The full story gets even worse. The data from the Bureau of Economic Analysis shows that our petroleum account flipped in 2020. In the first 11 months of 2019, we had a $14.1 billion deficit on petroleum and related goods In the corresponding period of 2020, we had a $15.7 billion surplus on the petroleum account. The non-petroleum goods deficit worsened by 7.7 percent, reaching $830.4 billion in the 2020 year-to-date period.
The monthly figures continue to be distorted by the COVID pandemic. Although factories worldwide are now largely open, shipping bottlenecks are distorting imports and exports in Asia. But the worsening trend in non-petroleum imports shows that even when COVID is completely behind us, the incoming Biden administration will have to confront a relentlessly growing goods deficit.
Looking at the bilateral trade relationships, our deficit with China is down 11.5 percent from last year to $283.57 billion year-to-date as of November.
China remains our biggest deficit nation, followed by the European Union. Our monthly trade deficit with Mexico declined by 16 percent to $10.56 billion.
November exports of goods increased $1.3 billion to $127.7 billion, but that was no where near enough to make up for imports which rose $6.4 billion on a Census basis to $214.1 billion.
China, Mexico and Newcomer Vietnam
The most recent trade figures released by the US Census Bureau indicate that imports from China will be lower than any time since 2012. If China exports in December hit this year’s monthly high of $31.6 billion, then China’s trade deficit with the U.S. would end 2020 at $315.17 billion. In 2012 it was $315.10 billion.
Our goods trade deficit with Mexico has already broken a record this year. We expect Mexico has replaced China in some supply chains, and that we will end 2020 with a $112 billion deficit with our USMCA partner. We ended 2019 with a $101.4 billion deficit with Mexico.
Bringing up the rear is Vietnam. As the EU deficit with the US remains relatively flat this year, Vietnam is gaining massive traction into the US manufactured goods business.
November’s trade deficit with them was $7.05 billion, and now sits at $63.68 billion on the year, Census data shows.
In 2019, we recorded another record-breaking trade deficit with Vietnam, ending the year at $55.76 billion. A lot of this is due to supply chain shifting out of China, as well as Chinese multinationals setting up shop in Vietnam to lower their labor costs and get around tariffs.
Top 3 Exports & Imports
Our top 3 exports for November were pharmaceutical goods ($5.3 billion); industrial machines ($4.8 billion) and automobiles ($4.6 billion).
Our top three imports looked fairly similar with automobiles leading ($14.03 billion); pharmaceuticals ($13.5 billion) and a big pick up in cell phone imports, which rose by nearly $3 billion month over month to $10.7 billion.
The takeaway from this month’s trade data: China is slipping in our supply chains, but Mexico and Vietnam are largely taking their place.