PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Has the Plunge in Exports and Imports Hit Bottom?

By at 5 August, 2020, 12:42 pm

by Raymond J. Keating-

After three months of stunning declines in U.S. exports and imports, the freefall stopped in June, according to the latest report on trade from the U.S. Bureau of Economic Analysis.

Seasonally adjusted exports of U.S. goods and services had stagnated for the previous two years, but with the spread of the COVID-19 pandemic, exports plummeted in March, April and May. Monthly exports plunged by 31.7 percent from February to May.

Finally, a bottom, at least for now, apparently was hit with some export growth resuming in June. But the June level of exports obviously stands far below where exports were in February.

Source: Federal Reserve Bank of St. Louis, FRED

The story is similar regarding imports. Two years of stagnation actually shifted to a decline at the start of 2020, with the fall in imports then accelerating in March, April and May. From February to May, U.S. imports declined by 19 percent. Again, some growth was registered in June.

Source: Federal Reserve Bank of St. Louis, FRED

Trade received a double hit over the past three years. Protectionist measures by the Trump administration created uncertainty, raised costs and reduced choices in terms of imports – hitting U.S. businesses hard as nearly all imports are inputs to domestic firms – and reduced exporting opportunities for U.S. entrepreneurs, businesses and workers in the international market. Of course, that was followed by the spread of the coronavirus, which led to sharper declines in international trade.

What trade needs are vaccines and therapeutics brought to market to effectively deal with the pandemic, and policy changes that reduce governmental barriers and costs for individuals and businesses to trade. Such developments, of course, in turn would be good news for the overall economy.

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

 

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