Chinese exports accelerated in May.
The New York Times notes China May Exports, Imports Beat Forecasts.
Bloomberg says the Global Trade Outlook Brightens. Really?
China’s overseas shipments accelerated in May from a year earlier, as global demand shows signs of picking up.
Exports rose 8.7 percent in May in dollar terms, the customs administration said Thursday. Imports increased 14.8 percent, leaving a trade surplus of $40.81 billion dollars. In yuan terms, exports rose 15.5 percent and imports surged 22.1 percent, bringing the trade balance to 281.6 billion yuan.
A brighter international outlook may provide support to the world’s largest trading nation, with the World Trade Organization saying it expects trade to “expand moderately” in the second quarter. Still, after a robust start to the year, the domestic economy is displaying some signs of weakening momentum. The official factory gauge held up in May, but a private gauge signaled contraction for the first time in 11 months.
China and the U.S. announced a deal in May to promote Chinese access for U.S. natural gas, financial services and beef as an “early harvest” of a 100-day review of the bilateral trade relationship that’s due to wrap up in July. China also vowed it will import $2 trillion from neighbors participating in its Belt and Road Initiative in the coming five years.
Robust Start to 2017?
Is Bloomberg in Bizarro World or an alternate universe somewhere?
Belt and Road Initiative
Wikipedia describes the Belt and Road Initiative.
The Silk Road Economic Belt and the 21st-century Maritime Silk Road, also known as the Belt and Road Initiative (B&R) and The Belt and Road (B&R), is a development strategy proposed by Chinese President Xi Jinping that focuses on connectivity and cooperation between Eurasian countries, primarily the People’s Republic of China, the land-based “Silk Road Economic Belt” (SREB) and the oceangoing “Maritime Silk Road” (MSR). The strategy underlines China’s push to take a larger role in global affairs, and the desire to coordinate manufacturing capacity with other countries in areas such as steel manufacturing.
China Exports and Imports in 2015
The above graphic from MIT.EDU, white arrows added by me.
China Surplusses 2016
- Hong Kong: US$275.3 billion
- United States: $253.1 billion
- Netherlands: $48 billion
- India: $47.2 billion
- United Kingdom: $37.6 billion
- Vietnam: $24.4 billion
- Mexico: $22.2 billion
- United Arab Emirates: $20.5 billion
- Singapore: $19.9 billion
- Pakistan: $15.6 billion
The above from Worlds Top Exports.
US Trade Deficit Widens
Before anyone gets too excited about improving global trade, I remind them of my June 2, article Trade Deficit Widens: Cascade of Bad News Accelerates, Trump Will Howl.
Trade in Goods and Services
Trade in Goods and Services Moving Average
US Trade Deficit by Country
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?
The US trade data is for April. The links at the top are for May.
Proper Conclusion
On a relative basis, U.S. demand for foreign products is strong and foreign demand for U.S. products is not.
One month does not a trend make, even if one believes the May numbers from China.
Mike “Mish” Shedlock
Trade deficits, except perhaps in extreme cases, are irrelevant because: Jobs and economic growth are the result of trade volume (the sum of imports + exports). The deficit or surplus is just a balance sheet item, and neither here nor there. Trade deficits bandied about as “news” are “weaponized statistics,” useful to support the agendas de jour. Much like trade sanctions, a weapon of warfare short of actual combat or nuclear exchanges.
Trade deficits would immediately fall to Zero if the USA stopped trading with deficit countries, and only maintained trade relations with surplus countries. The USA could do what the Saudis et al. did to Qatar, and just immediately ban all trade with the offending trade deficit countries (China, Canada, Mexico, Germany, et al.). But no one would be happy with a Zero trade deficit, as the trade deficit number is an irrelevant balance sheet item. Only the volume of imports and exports matters to the economy, not the trade deficit in a fiat (non-gold) world. Shipping industry knows this well. A contraction of trade is bad news. An expansion of trade, good news.
I fail to see why trade deficits matter when you are paying trade deficits in worthless digital or fiat, rather than gold or real money. If I could pay my bills with the output of my inkjet printer, I would run personal trade deficits (debt) to the max. Trade deficits are both logical and rational if you can issue unlimited fiat (debt) in exchange for real goods. You would be a fool not to max out when you can produce unlimited fiat and your trade partners are willing accomplices. Why would anyone want to end the free ride? Genghis Khan knew this and built a great empire using paper currency, though death was implied if you did not accept Khan’s fiat for your goods. Might not USA use its military might in the same way? Fiat or death, until the empire expires. Is that not the role of Central Banks?
“You would be a fool not to max out when you can produce unlimited fiat and your trade partners are willing accomplices. Why would anyone want to end the free ride?”
The key is the massive confidence game that we play with our fiat currency. We are so good at it, that when we tank the World economy that demand to buy more of our treasuries for safety purposes.
But you can’t over-bleed a sucker – so we just need to keep printing enough $$ to satisfy demand but leave everybody just a bit short.
Given the rising value of the $ at the moment, I think we are under-producing $s – time for a QE/Infrastructure spending round – maybe $500B-$1T if there are shovel ready projects.
The Fed, by saber rattling in interest rates, is doing a fine job of maintaining confidence in the $.
My only concern is that the clown show in the White House will damage our credibility to the point where the $ confidence game slips and we start to see more international trade denominated in Yuan or Euros – China especially would like to take over our role leading the World’s monetary policy.
Question – doesn’t how you fund the deficit matter?
What if it is funded by unsustainable debt?
Trade balances may not matter until the question of where the money comes from and goes to enters the equation.
Who is beggaring themselves? Who is becoming wealthier? Who is forming capital? Is that capital being recycled globally or hoarded?
The trade deficit does no bother me. The capital deficit does. Every false argument begins with a big lie. In this case dollars = wealth. Bull S#!T. Dollars may represent the ability to buy wealth, but they are not wealth in and of themselves. Owning the ability to produce the products and services that people will pay for = capital = wealth. Visit any place 60 miles from the coast. It is desolate out there. Everyone is broke. Why? Our capital has been exported.
Would you like onions on that burger?
–> “Is Bloomberg in Bizarro World or an alternate universe somewhere?”
Why can’t it be both? Have you ever met Mike Bloomberg or the former Businessweek staff he hired?
Bloomberg (the man, not the terminal) put 110% of his heart and soul into becoming a soulless politician…. and he “succeeded” if you can call that a win