Trump’s howling about the US trade deficit with Mexico, Canada, Germany, the EU, etc, has me thinking about how to portray the result in pictures.
Data is from the latest Census Department report on International Trade.
Click on image for enhanced view.
| Trade Deficit | Exports | Imports | Percent of Total | |
|---|---|---|---|---|
| Total | 243,905 | 498,608 | 742,513 | 100 |
| Eurozone | 37,829 | 70,207 | 108,036 | 15.51 |
| Germany | 20,054 | 17,131 | 37,185 | 8.22 |
| Canada | 8,501 | 89,673 | 98,174 | 3.49 |
| Mexico | 23,037 | 77,566 | 100,603 | 9.45 |
| China | 106,481 | 39,335 | 145,816 | 43.66 |
| Japan | 22,596 | 22,005 | 44,601 | 9.26 |
| Canada, Mexico, China, Japan, Germany | 180,669 | 245,710 | 426,379 | 74.07 |
| Canada, Mexico, China, Japan, Eurozone | 198,444 | 298,786 | 497,230 | 81.36 |
Canada vs China
- Exports to Canada: 89,673
- Imports from Canada: 98,174
- Canada Sum: 187,847
- Exports to China: 39,335
- Imports from China: 145,816
- China Sum: 185,151
On a bilateral basis, Canada is the US’s largest trading partner.
Trade Deficit Breakdowns
- China alone accounts for 43.66% of the deficit.
- China, Mexico, Japan, and Germany account for 70.59% of the deficit.
- China and the Eurozone account for 59.17% of the deficit.
- China, Mexico, Japan, and the Eurozone account for 76.65% of the deficit.
- Canada, the US’s largest trading partner, accounts for only 3.49% of the deficit.
This is what has Trump upset. But he is barking up the wrong tree when he blames NAFTA.
For discussion, please see Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?
Mike “Mish” Shedlock
A problem of incomplete statistics. All I see are gross percentages which do tell me much about the trades. At best what is presented a very incomplete “truth”. A factoid of dubious value. It is one thing if country X sends in trade a great number of finished goods and we export raw materials or unfinished goods the value of which may be far less than what we buy. But if country Y exports mostly raw materials and unfinished goods, the value of which is greater than what in imports, then we have a different case. Maybe I’m just picky, but I would rather see a more specific review of what we export to whom and what we import so that I may form some judgement on the matter. The is the problem with general economic measurements, the very general are not of much value and yet so many economists and politicians assume they are.
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A faulty assumption: the FED, BLS, etc. are trying to create truthful statistics (instead of statistics that support the current politicians and bankers personal objectives – self enrichment in money and power.)
They’ve been jiggering the figures for the past 30 years, and it’s only gotten worse over that period:
Just mouse over the Alternative Data panel to see what the real figures are for unemployment (EMP), inflation (CPI), & M3 money supply (dropped in 2006 with no real explanation).
(The real numbers for EMP & CPI are the high ones based on the way they were figured around 1990. ;^)
http://www.shadowstats.com
“Torture the data enough & it’ll confess anything!”
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Actually, the collection of statistics has always been a problem ever since the idea was launched. George Washington’s expense comes to mind as do the estimates of union generals early in the civil war. seems they were always out numbered by more rebel troops than the south had int its entire population. Hoover and FDR were the founders of agencies to collect a wide range of statistics. Hoover started that when he was secretary of commerce. Being an engineer he just loved numbers, the more the merrier. FDR loved numbers because they could be easily used to convince people of anything, that is what lawyers do. And so it continues from the great society to the what’s in it for me society.
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Accurate trade statistics are set up to accurately lie.
That is because US exporters and importers structure their sales to minimize high tax exposure, and to siphon off profits into low tax jurisdictions. US export sales into high tax countries (such as and including among others, Germany, Japan), are (1) routed through subsidiaries low tax jurisdictions (Netherlands, Netherlands Antilles, Ireland, Switzerland, Bahamas, Cayman Islands, etc), and (2) are stripped of their high profit intangible royalty rights through other subsidiaries in the same low tax jurisdictions cited above, and so their aggregate revenue and profits from the high tax countries are minimized.
The US exporters’ fat revenue profits in the low tax jurisdictions need to be allocated and apportioned to the end country sales for proper evaluation of true trade deficit or net benefit.
The reason for all of this rigging is rooted in and can be blamed on US tax policy which is to tax US companies’ worldwide income, whereas every other country is contrary, and US corporations have enlisted the highest quality international tax and accounting professionals to quick step and optimize their business tax structures to accommodate the real world.
Witnesseth Apple.
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Off Topic: IMO any conservative or Republican who used the ” nigger” word in public as Bill Mather did would be fired or forced to resign even after an apology- but he will be forgiven since he hates Trump!
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Are there any equivalent incidents from right ing politicians or comedians – you know like calling for somebody to be lynched an then apologized? Maybe from MS?
Our society seems to be spiraling downwards into days that we thought we had left behind and both sides are to blame.
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Imagine a guy rents a very expensive car to go on his first date with a lovely lady. And not only did he tell her the car is his, he promised her an even more expensive car if she becomes his girlfriend. Well, one month later she’s his girlfriend and she asks him for the car. He can keep on lying, but the lies will catch up to him. One day he will have to admin that his promise was a big lie. 😦
But Trump would never lie to the American people because he said so. He’s going to make America Great again.
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Which lie? The one where our government has told us for decades that we can eternally buy far more than we can pay for with anything but debt or devalued currency?
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The true source of trade imbalance started in the 60s,in the search for cheaper labor & greater profits whole industry’s where exported to China,technology that took hundreds of years to acquire China got it for free in exchange for manufacturing cheaper goods. We destroyed our manufacturing base, USA must take the blame for its own demise.
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yep, Greed 🙂
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You prefer the high prices and crappy products?
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I prefer having a job and being able to pay for what little I can afford, to having NO job and being dependent upon government entitlements and debt. But by all means, keep buying the “good deal”. Nothing bad EVER comes from that.
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It’s not like a nascent America didn’t do something similar to England and Europe. I’m not sitting in a teepee right now.
There’s also America’s rather substantial influx of technology creators from China.
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If imbalances are unsustainable they will not be sustained but the adjustment will likely be stressful.
The US has the blessing and curse of global reserve currency status too that facilitates imbalances and excess borrowing to fund it all.
Want to change it?
Value your labour more highly
Live within your means
Make working absolutely necessary (forget being voted in)
Increase tariffs, or,
Just lose reserve currency status and all the above will be forced by the market, except you labour will then be cheap just to get by. Painful.
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The balance of payments always balances… the short of it being that where you have a national trade imbalance, it is made up for by purchases into that country, which sort of means you are selling off the country in some way. Sure, FDI or sovereign debt purchases etc. are classed as investment , but I don’t think we should fool ourselves as to who end up making and who paying in the larger scheme. Global corporate finance is what it is it is, as the US does to the world so it has done to itself, until people find it unacceptable.
https://www.forbes.com/sites/timworstall/2016/06/22/americas-trade-deficit-is-largely-paid-for-by-european-investment-in-american-manufacturing/#6cb019e844f9
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I agree – we are buying things from other countries and selling them dollars, property and share appreciation instead. I’m simplifying greatly here, but what a gig!
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The dollars don’t get kept, almost all, including foreign reserves held by other countries, are used to buy into the USA. You can be sure someone investing billions or trillions is going to do some due diligence on influence and profits, as opposed to the average person who sends his money abroad each time he picks up a bargain at the local store. So the social and political questions are along the lines of :
How much political influence is being bought, and by who?
How much own ownership and profit is the US willing to put into foreign hands?
What is the effect on US society?
How do you decide the shape of international trade and relations?
Etc.
Fiat and frl give tremendous power to the financial world, global politics and so on, is that the management we would like? There are advantages and disadvantages, the advantages are more obvious to the average person ( increase of goods for example), the disadvantages are much more subtle.
Interestingly a most recent topic at Bildenberg was ‘ Can globalisation be stopped? ‘. I think the point is that any trade outside of nation is a form of globalisation… there is no clear place where it starts or stops really. Hence a much narrower and pointed definition of the question would be ‘ At what point does global trade and its management become detrimental to a nation, and how is it possible to apply restraint on those that seek profit at the expense of all else? ‘. Of course the average person is wound up in the equation by his own choices also, but at the same time any ‘innocent’ person is also subject to the combined whim of the population. A gold standard is one route, but really it still comes down to convention – stepping out of a gold standard when it no longer suits seems to be quite conventional if modern history is observed.
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“How much political influence is being bought, and by who?”
Every time there is a global crisis, treasury bonds soar. People are buying into the U.S. because we have the World’s reserve currency, and until January, a sane government that ensures the obligations will be met.
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No doubt the dollar, investment in, is more stable than most of what else is available to finance. The point is that the return flow of dollars, whether trillions in national reserves or institutional investors with billions, is largely parcel to trade and deficits/surplus. Picture an isolated country , the moment a local says ‘ I think I will by treasuries ‘, he exchanges his currency for dollars, his currency is then returned to his country by investment also, of whatever kind. So the exchange nets. Local owns treasuries, US owns local assets. The imbalance caused by trade deficit is slightly different though – dollar goes to China say to buy a good , China buys US assets with that dollar , US customer gets a good. Sure, it all goes round, but some don’t agree with the results, or the method/framework created for this scenario.
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Ah, excuse me.
Growing up in the sixties I do not recall EVER being forced to buy imports.
Sure business sold us cheap foreign goods, and the more they sold us the more we demanded. I’m simply sick and tired of pretending that only business is greedy and we are just the victims.
WE DID THIS. Business does NOTHING unless WE enable it. The day Americans DEMAND to buy only domestic products is the day that ALL manufacturing returns.
Are YOU willing to pay?
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The nature of competition madash – each person decides what is best for him, and cheaper means more. That is ‘normal’. The greed is in the financial world, where it is known that value is being transfered abroad. People don’t have to buy that, but they don’t see it, they are sold how deserving they are, that this is American enterprise at its best, win-win . When US goods start costing more compared to income due to lack of domestic production hence wages , and due to foreign competition for other US assets, US goods get forced out further. It is something of a vicious circle.
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So it’s NOT our fault. We are simply stupid regardless of how many advanced degrees we hold, no matter how wealthy we become, it is always “others” who manipulate us. We are powerless to defend ourselves, and as such, I can’t help but wonder why we bother to complain. If we are to behave a sheep, why do we complain at being treated as sheep? If we need protecting by the very same smart and corrupt people who are abusing us…..well, I have no answer for that other than I guess we deserve EXACTLY what we get.
All of this noise, this gnashing of teeth over so many injustices, when the BEST we can do is beg for a benevolent dictator. Sad.
And to pretend that our “normal” desire for ever cheaper is not GREED.
Greed infects us ALL.
To demand more of others than we are willing to provide from ourselves IS GREED.
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Well I was hoping
Made in PRC
Might just consider
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Surpluses: https://finance.yahoo.com/news/trump-said-hes-trying-country-164400665.html
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Now factor in the impact of transfer pricing (to evade US taxes) of internationally traded goods from the finsihed product , all the way down to the lowest component.
trade statistics are a waste of time and effort. they are an accounting entry and do not reflect the reality of production and where it is sourced, or how it is priced (to evade taxes).
the real argument trump is having runs along the lines of “we want to buy german designed cars built in US domiciled assembly plants that employs US workers and uses US raw materials – from the smallest plug to the largest wheel – profits can be repatriated back to germany and taxed there – but when US corporate tax rates drop to 15% v a combine Geman tax rate of 34%, why would you do that?
as an FYI, here are all countries corporate tax rates – exlcuding the 20-25% german/eu border adjustment tax in place now (called VAT / Value Added Tax), that the US is trying to replicate.
https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-corporate-tax-rates.pdf
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I believe your graph should read in millions not thousands. Total trade deficit is now $244.0 billion for 2017.
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You are correct
That should be in millions
Does not affect percentages
Thanks
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Mish, there is another mistake in your presentation. It is not the Eurozone but the Euro area (incl. Russia and Switzerland). The Eurozone are the countries with the €.
The charts would also be more accurate and less confusing if Germany were situated within the Euro area, since the Euro area statistics you quote are inclusive of the German numbers [I checked the source].
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The Euro Area is the Eurozone. It does not include Russia or Switzerland
I did Germany separate on purpose – Yes Germany is a part of the Eurozone as well
There are many possible grouping
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I do wonder what the country and the rest of the world would look like if we were still on the gold standard. But still I have read many times that there r a good many companies who have jobs but kids coming out of college r wherever do not have the skills to operate sophisticated machinery with technology being what it is today so it is outsourced. Also I’ve seen Presidents n the past who thought they could solve the trade deficit if we could just devalue the dollar by say 50% over a couple of years. Yet it seems like every time the dollar is pushed way down to help us compete on a more level playing field, companies simply raise their prices instead of going for market share. Sadly it seems they just want to get the earnings up n a hurry so their stock options will make them rich the easy way. I think stock options tempt people to b extremely selfish but I don’t know what we can do about it.
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“I think stock options tempt people to b[e] extremely selfish but I don’t know what we can do about it.”
Stock options in established companies [executive options] that are a large part of top executive compensation are just a way for execs to pay themselves massive amounts without it looking like their salaries+bonuses are completely ridiculous.
Stock options in start ups [start up options] are used to encourage expensive talent to take a smaller salary with the hope of future riches.
Having benefited from both, the former are much better for the individual. The executive options don’t encourage anything except hanging around until the stock market surges and you can cash in for a song.
The start up options can dramatically lower the salary cost in the early years of a start up and tie everybody into drinking the kool aid. This is vital because there is so much risk and doubt in start ups that these options act like a lottery ticket that keep everybody hoping for the payout.
BTW, from my experience the best time to join a company if you want to get rich is when they are in their second or third round of funding and are looking for VP level people to take over departments currently run by a fairly junior person – this maximizes option packages while minimizing risk. I’ve seen a lot of people come into the startups I was part of about 2-3 years before they were bought or IPOed and made a lot of money.
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wood shop and metal shop no longer exist at junior high or high school in most of the country.
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Well are you really trying to compliment corporate America? Now they are taking on massive amounts of debt for stock buybacks. So up go the earnings and the stock options. This is a malevolent way for corporate America to operate in my opinion-so ok go for it!
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I agree. But since we promote the most “coin-operated” people to the top of our businesses, what do we expect.
Maybe this is why it takes a company driven by a single individual with a vision to make it to the top these days.
Apple with Steve Jobs
Amazon with Jeff Bezos
Alphabet with Sergei et al
Maybe the professional classes with HBS MBAs will just flatline big companies when they take them over and bleed them into a death spiral?
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Are these statistics merely representing the trade imbalances in goods? Because the US trade balance with some countries is a surplus when you add in the trade in services.
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Dear Mish,
I like the data table after NAFTA. Do you have a data table before NAFTA? Do you have different years before NAFTA and after NAFTA? Thank you.
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Frankly the win-lose viewpoint when it comes to trade seems to miss the point.
Instead I look at the wealth instead of GDP or imports vs. exports.
Last year the U.S. ran a trade deficit of $244B. The wealth of the country grew $1.7T (about 7x of of the trade deficit).
Source: Credit Suisse Global Wealth Report 2016
http://publications.credit-suisse.com/tasks/render/file/index.cfm?fileid=AD783798-ED07-E8C2-4405996B5B02A32E
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Did your wealth grow? Mine didn’t but my share of the national debt sure did, and I’m still earning .25% return on my savings.
Face it folks. we are held hostage to our numbers manufacturers who have little interest in truth. What is known is that our “system” if we can call it that, is dependent upon CONFIDENCE, a confidence that has less and less basis in truth to lean upon. Therefore if we are to stay afloat the only alternative is distortion and falsities that will keep enough warm air entering the balloon to keep if from complete collapse. GDP? Measures of wealth? Unemployment? Look at the REAL statistics as to how many families are dependent upon entitlements, how many are not working and are not looking and who are doing far better than minimum wage provides.
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Even if the numbers are wrong, some of the trends are apparent. The average wealth per person in the U.S. is $345,000. The median wealth is $45,000. This difference is difficult to imagine. I’m all for capitalism, but when we are so imbalanced that we have to have as many dependent families, as you note @madashellowell, we need to either redistribute the wealth or become a plutocracy with out own aristocracy to rule over us. I don’t know how much it is going to cost to get into the aristocracy, but I’m pretty certain I’m not going to be in it as I imagine it starts at the $50M level.
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Cars assembled in Mexico and Canada use high value components built in this country. Cars imported from overseas support nobody in this country but car dealers. NAFTA is not the problem, it’s the huge number of cars imported from Asia and Europe that are the problem. These countries love to preach about free trade as long as they have a surplus. As soon as that ends, they will impose tariffs without a second thought. Free trade is a concept that exists in the minds of academic economists. In reality, trade is a political issue, not economic. We give “allies” free access to our markets for the privilege of defending them. The U.S. is the pathetic kid on the block who gives away his candy so other kids will like him.
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Freedom and liberty are absolutely dependent upon knowledge. If we are not willing to spend the time to understand what is and what isn’t in our interest, then talk of freedom, liberty or even survival is pointless.
While we can enjoy our technologies and hope for a life of ease where cheap foreigners or robots provide our daily bread and entertainment, even the only slightly brain living creature would understand this is not sustainable. Nature has never tolerated the redundant and unnecessary for long. Dreams of being paid to eat are suicidal delusion.
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Say themonosynaptic, so as not to be a hypocrite, if I were an executive of a major Corporation in our country and had the same opportunitie to make a great deal of money n a hurry with stock options, I would do it in a flash!
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I”m not sure I understand what you are saying, but making a pile of money from executive options is legal and as far as I’m concerned, good luck to you if you do. I was just teasing out the different uses of stock options in established companies where they are the vehicle for the top few, to startups where they are far more ubiquitous.
Hope that answers your point.
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We are looking for numbers, for statistics, for PROOF that things are NOT what we fear them to be. And those providing us this narcotic are being very well paid to do so. Sixty pieces of silver….at least.
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themonosynapic yes you make very good points about startups offering stock options instead of cash, something I would also do n same situation. Nevertheless I’ve seen a lot of abuse like for instance executives going back to exercise their options when the stock was at the very highest for that month and get away with it. It’s obvious u know a whole lot more about this than do I.
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