Written by Michael Moon, GEI Associate
The U.S. trade deficit fell to $44.4 billion in May, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis reported last Thursday. The deficit was a 5.5% decrease from $47.0 billion in April. Total May exports were $195.5 billion, up $2.0 billion from $193.5 billion in April, while imports were $239.8 billion, down $0.7 billion from $240.5 billion in April.
Compared to May 2013, the trade deficit fell by $0.4 billion, with exports up $8.3 billion and imports up $7.8 billion.
The total U.S. exports and imports are comprised of two parts: goods and services. In May, the goods deficit was $63.3 billion while the services surplus was $18.9 billion.
The U.S. auto industry was the largest contributor to the increase in export of goodsfrom April, with an $800 million increase in exports of automotive vehicles, parts, and engines. The auto industry also witnessed a large increase of $1.3 billion in imports compared to April, which was not enough to offset the $1.7 billion decrease in imports of industrial supplies and materials.
The trade deficit can be reduced by increasing exports or decreasing imports. In his State of the Union address on January 27, 2010, President Obama announced the National Export Initiative with a goal of doubling American exports abroad over the following five years. Total U.S. exports have steadily increased each year since then but not at a rate that would make his goal seem likely to be achieved by 2015:
Total U.S. exports only grew by 46% from 2009 to 2013. Although new records were set in 2011, 2012, and 2013, it is unlikely that 2014 will yield $3.16 trillion, which would account for the remaining 54% growth that President Obama promised, unless some drastic events occur.
Although May marked a fall in total goods and services trade deficit, it was also the month of the highest real trade deficit ever in U.S. history when excluding petroleum products. The following chart, provided by Zero Hedge, shows the U.S. trade deficit excluding oil over the last two decades:
The fall in trade gap exists thanks to oil production, while other export sectors keep tumbling. The weakening of these sectors will continue to create job losses that will make President Obama’s”double exports and two million new jobs” promise increasingly improbable.
- News Release: U.S. International Trade in Goods and Services (U.S.Department of Commerce – Bureau of Economic Analysis, 3 July 2014)
- National Export Initiative (U.S. Department of Commerce – International Trade Administration)
- Excluding Oil, The US Trade Deficit Has Never Been Worse (Tyler Durden, Zero Hedge, 4 July 2014)