Troubling Trade Numbers for July: A Small Business Story

By at 7 September, 2017, 8:32 am

by Raymond J. Keating-

The U.S. trade numbers, as released by the U.S. Bureau of Economic Analysis on September 6, were troubling.

Exports of U.S. goods and services declined slightly in July relative to June – from $194.9 billion to $194.4 billion.

Keep in mind that the story on exports has been disappointing for more than two years now. Exports barely inched forward in 2015, and actually declined in 2016. That was the first annual decline since the recession year of 2009. Also, the June 2017 level of exports was the first month that broke above the previous high established in April of 2015.

Meanwhile, imports not only fell in July, but have now declined for three straight months. Also, the July 2017 level of $238.1 billion remains below the January 2017 high of $240.5 billion, with the previous high being $240.1 billion in March 2015. In effect, we’ve seen no growth for two-plus years on the imports front.

These trade numbers point to five problems.

• First, a decline in exports in July raises questions about the rate of GDP growth for the third quarter of this year.

• Second, along similar lines, imports largely are a reflection of domestic growth. That is, more robust U.S. growth translates into increased domestic demand for both consumer goods and services, and capital goods and inputs. Declining imports raise questions about the state of economic growth.

• Third, declining exports is bad news for the small businesses that account for most U.S. exporting firms. For example, firms with fewer than 50 workers make up 86.7 percent of all exporters, and firms with less than 100 employees account for 91.9 percent of exporters, according to U.S. Census Bureau data.

• Fourth, importers also suffer when trade declines, and again this is a small business story. Among all U.S. importers, 85.5 percent have less than 50 workers, and 90.8 percent less than 100 employees.

• Fifth, trade policy has been pointed in the wrong direction now for more than eight years. Under President Obama, the U.S. largely became a non-entity in terms of advancing freer trade, that is, doing little to advance an agenda to lower or eliminate government barriers to trade. Toward the end of the Obama years, however, came the Trans-Pacific Partnership (TPP) trade deal. But President Trump has created more questions and uncertainty on trade by, for example, fully pulling the U.S. out of the TPP, issuing troubling statements about the future of NAFTA, and threatening to pull the plug on the South Korea-U.S. free trade accord.

Trade matters a great deal to the U.S. economy, to small businesses and to workers. It’s essential that U.S. re-establish itself as a global leader in advancing free trade. If not, the rest of the world will push ahead with reduced barriers to trade, and opportunities for U.S. entrepreneurs, businesses and workers will suffer.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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