The Latest Trade Data: Exports Down,Imports Up, and…Trade Deficit Widens

By at 7 December, 2018, 11:59 am

by Raymond J. Keating-

The latest report from the U.S. Bureau of Economic Analysis tells us that monthly U.S. exportsdeclined in October, and came in below the high hit in May of this year.Meanwhile, imports increased slightly in October, after a larger jump higher inSeptember.

As for the decline in exports, there seem to be two factors at work. One is a widely noted slowdown in global economic growth. Second is retaliation by other nations to U.S. tariff measures.

As for imports, though uneven, monthly growth has been uninterrupted over the past six months. That reflects domestic economic growth. In addition, there has been much speculation that import purchases have been accelerated in anticipation of still higher tariffs being imposed at the start of 2019.

Ironically, the U.S. trade deficit – which has been cited as the reason for a move toward higher tariffs and the Trump administration’s general trade policies – actually has increased. Through the first ten months of this year, the U.S. trade deficit is higher than it was in the same period last year, and the 2017 level was higher than the previous year.

In reality, a trade deficit is largely meaningless. In fact, if one were to make an argument, the data and the economics support the proposition that a growing U.S. trade deficit reflects a growing U.S. economy, with imports rising, and a current account deficit (mainly the trade deficit) being the flip side in the balance of payments of a capital account surplus. That is, the U.S. attracts foreign investment. Such investment, of course, is good for U.S. economic growth. In the end, the most surefire way of reducing the U.S. trade deficit is to put the economy in recession.

When it comes to trade, the key is that both exports and imports grow. Currently, exports have declined, and imports might be ready to go negative as well. What to do? A turnaround in current U.S. trade policy is needed – in favor of aggressively advancing open trade and more trade agreements that lower barriers for small business expansion and growth opportunities in overseas markets.


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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