Economic Update: The No-Growth Trade Economy

By at 3 July, 2019, 8:51 am


by Raymond J. Keating-

Policy matters. If it didn’t, why would anyone care what went on in Washington D.C.? Of course, we’d all be much better off if policy didn’t matter much, but given the size and scope of government, that’s not the case.

One of the most glaring examples of how policy matters has been occurring on the trade front during the Trump administration. The imposition of tariffs, threats of tariffs, a retreat from the U.S. leadership position on free trade, and retaliatory measures by our trading partners have had negative effects on the realities of trade in the economy.

Looking at the latest monthly trade report from the U.S. Bureau of Economic Analysis, we see that the May 2019 level of exports actually is down by 1.3 percent versus May 2018, which marked the high in exports. If we compare the three month moving averages (given some volatility in month-to-month data), May 2019 exports were off by 0.6 percent.

As for imports, the high was registered in October 2018. The May 2019 level of imports was down by 0.2 compared to that October high. The three month moving average points to a decline of 0.3 percent.

When it comes to the trade economy, the U.S. is stuck in, at best, a no-growth mode. That’s troubling for the small businesses (fewer than 50 employees) that make up more than 86 percent of both U.S. exporters and importers.

And it’s troubling for overall economic growth, given that the growth in real total trade from 1980 to 2018, for example, equaled 41.2 percent of U.S. real economic growth.

Make no mistake, the no-growth trade economy is serving as a drag on the growth in the overall economy – and it will continue to do so as long as the U.S. chooses to erect barriers to trade.


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


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