MAPI Report: U.S. Deficit on Track to Increase by $50 Billion

Estimated deficit in U.S. manufactures could mean loss of 350K jobs.

The surge in the U.S. trade deficit in manufactures in the third quarter of 2014 and the increase in the Chinese trade surplus shows the countries continued their opposite growth paths, 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, MAPI senior adviser for international trade and finance, notes that U.S. manufactured exports grew by 5 percent to $299.4 billion in the third quarter compared with 2013. The U.S. deficit in manufactures rose by $13 billion, or 9 percent, compared with the second quarter of 2013. This followed a 19 percent increase in the deficit in the second quarter.

Conversely, Chinese exports were up 13 percent to $606.2 billion in the third quarter. Its trade surplus increased by $52 billion, or 23 percent, in the third quarter over 2013, following a 9 percent increase in the second quarter.

“The five-year increase in the deficit of $250 billion since 2009 results in the loss of about 1.7 million jobs, or 15 percent of the sectoral labor force,” Preeg wrote. "By sector, Chinese information technology exports of $200 billion in the third quarter were almost four times larger than the $55 billion of U.S. exports, and growing faster, which explains the Chinese interest in a WTO IT agreement."

Preeg estimates a potential increase to $50 billion in the U.S. deficit this year in manufactures, which would mean a net loss of approximately 350,000 jobs in the American manufacturing sector.

"A U.S. trade strategy to reverse this serious decline in U.S. export competitiveness for the technology-intensive manufacturing sector needs to combine trade and exchange rate policies, with exchange rate policy far more important In the case of China," Preeg wrote.

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