The 2020 Mid-Year Economic Update_long

MAPI Report: U.S. Deficit Rises 15% in 2Q

"U.S. and Chinese trade imbalances continue to surge at high, double-digit rates."

Improved second quarter trade data for manufactures did little to stem the tide of a downward trend for the United States, according to an analysis from the MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation (MAPI).

In the report, Ernest Preeg, Ph.D., MAPI Foundation senior advisor for international trade and finance, notes that U.S. manufactured exports decreased by 2 percent, to $298 billion, in the second quarter as compared with 2014. The U.S. deficit in manufactures rose by $21 billion, or 15 percent, compared with the second quarter of 2014. This follows a 30 percent increase in the manufacturing trade deficit in the first quarter, inflated by weather issues and a West Coast dock strike.

Chinese exports were also down 2 percent, to $533 billion, in the second quarter on a year-over-year basis. China's trade surplus increased by $14 billion in the second quarter over 2014, or by 6 percent, and follows a 24 percent rise in the first quarter of 2015.

"Although global trade in manufactures is growing at a much slower pace in 2015, the U.S. and Chinese trade imbalances continue to surge at high, double-digit rates," Preeg wrote. "The U.S. $48 billion deficit increase in the first half of the year equates to a loss of 300,000 trade-related American manufacturing jobs, and the deficit is on track for a loss of 500,000 or more jobs for the calendar year.

"This is the sixth consecutive year of soaring trade deficits and very large job losses, which from 2009 to 2015 will total 2.5 million, or 25 percent of the sector labor force," Preeg added.

The 10 largest high-technology export industries made up 65 percent of total U.S. manufactured exports and 52 percent of Chinese exports in the first half of 2015. Chinese exports in the first half were $532 billion, or 41 percent larger than the $376 billion of U.S. exports, and were in surplus by $166 billion compared with a $160 billion U.S. deficit.

According to Preeg, the new data, combined with China devaluing its currency relative to the dollar in order to stimulate exports, continues an unfair and unbalanced trade relationship for U.S. manufacturing.

From 2009 to 2014, the U.S. trade deficit in manufactures doubled to $550 billion, while the Chinese surplus doubled to $1 trillion and the EU surplus doubled to $500 billion.

"Sixty percent of the U.S. $600 billion annual trade deficit in manufactures is with China, and therefore exchange rate–induced exports by China result principally in increased U.S. imports," said Preeg.

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