Latest Trade Data is Distressing

By SBE Council at 5 January, 2023, 3:39 pm

by Raymond J. Keating – 

The latest trade data from the U.S. Bureau of Economic Analysis is quite distressing – adding to a mounting mess of economic worries.

In November, both exports and imports took notable dives. U.S. exports of goods and services dropped by 2.0 percent. For good measure, exports now have declined for three straight months.

Meanwhile, U.S. imports plunged by 6.4 percent in November. And while the month-to-month data have been uneven, imports have been on a general decline during the past six months.

In addition, it must be noted that these numbers are in nominal dollars, and once inflation is factored in the picture generally gets worse.

Keep in mind how critical trade is to our economy.

In real terms, total trade (export plus imports) equaled 31.7 percent of U.S. GDP in 2021. And exports are sales and opportunities for U.S. entrepreneurs, businesses and workers, while U.S. imports are much the same given that nearly all imports are inputs to domestic businesses.

Trade is vital to small businesses, given that most industries in the U.S., from manufacturing to retail, are overwhelmingly populated by small businesses. Specific trade data shows that more than 86 percent of U.S. exporting firms have fewer than 50 employees, and the same goes for U.S. importing firms.

All of this speaks, once again, to the need for policymakers to turn the policy ship around and implement a pro-entrepreneur, pro-investment, pro-growth agenda. And that must include working to reduce governmental costs and barriers to trade by advancing free trade accords. Free trade agreements in the end are and should be about reducing the taxes and regulations that inhibit consumers, entrepreneurs, businesses and workers from experiencing expanding opportunities.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.