Trade Stagnation

By at 7 February, 2024, 7:07 pm

by Raymond J. Keating –

International trade has been a positive for U.S. economic growth for decades. In the most straightforward terms, exports boost U.S. entrepreneurs, businesses and workers, while imports serve as inputs to U.S. businesses, and reflect the state of domestic economy, as a growing economy increases the demand for imports on various fronts.

The latest trade data from the U.S. Bureau of Economic Analysis, however, shows that trade stagnated, at best, in 2023. As noted in the report: “Exports were $3,053.5 billion, up $35.0 billion from 2022. Imports were $3,826.9 billion, down $142.7 billion from 2022.” Those are nominal numbers, not adjusted for inflation, covering goods and services. Both goods exports and goods imports were down for the year.

The initial look at 2023 GDP (gross domestic product) that we got at the end of January showed real exports for the year up by 2.6 percent, and real imports down by 1.7 percent. Given this latest trade data, the next GDP revision is likely to show a downgrade in exports.

Source: Federal Reserve Bank of St. Louis, FRED

The above chart shows the stagnation that occurred in terms of U.S. exports since mid-2018. Below is the story on imports, which have now declined since mid-2022.

Source: Federal Reserve Bank of St. Louis, FRED

Of course, part of the story was the pandemic, but there has been no robust snapback and growth that has moved real exports, for example, well above their pre-pandemic levels. Rather, this is a story of stagnation. And part of that story, no doubt, is about two presidential administrations in a row now that have been overtly hostile to free trade.

The ills of protectionism – increased costs and reduced opportunities – have supplanted a free trade agenda that spurs opportunity, competition and growth. As long as U.S. policymakers remain stuck in protectionist thinking, U.S. entrepreneurs and businesses will be placed at a disadvantage in international markets, and consumers will experience increased costs.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.


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