Poor Trade Data vs. the Importance and Resiliency of Trade

By at 6 April, 2023, 9:57 am

by Raymond J. Keating –

The latest monthly “U.S. International Trade in Goods and Services” report pointed to a decline in both U.S. exports and imports in February 2023.

Keep in mind that from a small business perspective, exports effectively measure sales and opportunities for U.S. businesses and workers in the global marketplace, while imports measure inputs of U.S. domestic businesses, from manufacturers to retailers.

In February, exports declined by 2.7 percent versus January (in nominal dollars, by the way), and imports were off by 1.5 percent.

Monthly exports came in at $251.2 billion in February 2023, which compared to the recent high of $262.3 billion in August of last year.

Meanwhile, monthly imports registered $321.7 billion in February 2023, which was down from the recent high of $350.4 billion in March 2022.

It’s also worth noting that real exports and imports both declined in the fourth quarter of last year, according to the latest GDP data. In addition, as noted in the following chart, real exports in the fourth quarter of 2022 stood at the same amount as in the second quarter of 2018.

Source: Federal Reserve Bank of St. Louis, FRED

In the face of these and other troubling trends on trade, it’s critical to keep in mind the importance of international trade to our economy. First, for example, while real total trade, i.e., real exports plus real imports, equaled only 7.6 percent of real U.S. GDP in 1960, that grew to 32.1 percent in 2022.

Second, as noted in a new report from the Brookings Institution, international trade improves economic resiliency in difficult times. As noted in the report: “…the COVID pandemic provided novel arguments against free trade based on global supply chain resilience, but neither the pandemic nor short run policy response had enduring effects on trade flows. We demonstrate that global trade was remarkably resilient during the pandemic and that supply shortages would likely have been more severe in the absence of international trade.”

That shouldn’t surprise anyone, as a more diverse supply chain will provide more options during crises, and therefore, prove more flexible and durable.

Trade matters to American entrepreneurs, businesses, workers and consumers a great deal. It’s therefore crucial that policymakers step back from protectionist rhetoric and actions, and instead, start, once again, advancing free trade agreements that reduce or eliminate governmental barriers to trade.

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.



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