Dear tariff fans (both parties), let’s check in on how we are doing. 
The Advance Economic Indicators for May are headed in the wrong direction.
Advance International Trade in Goods: The international trade deficit was $100.6 billion in May, up $2.7 billion from $98.0 billion in April. Exports of goods for May were $166.7 billion, $4.6 billion less than April exports. Imports of goods for May were $267.3 billion, $2.0 billion less than April imports.
Advance Wholesale Inventories: Wholesale inventories for May, adjusted for seasonal variations and trading day differences, but not for price changes, were estimated at an end-of-month level of $901.6 billion, up 0.6 percent (±0.2 percent) from April 2024, and were down 0.5 percent (±0.7 percent) from May 2023. The March 2024 to April 2024 percentage change was revised from up 0.1 percent (±0.4 percent) to up 0.2 percent (±0.4 percent).
Advance Retail Inventories: Retail inventories for May, adjusted for seasonal variations and trading day differences, but not for price changes, were estimated at an end-of-month level of $796.8 billion, up 0.7 percent (±0.2 percent) from April 2024, and were up 5.0 percent (±0.7 percent) from May 2023. The March 2024 to April 2024 percentage change was unrevised from the preliminary estimate of up 0.7 percent (±0.2 percent).
Adding to Inventory
Why wholesalers and retailers are adding inventory in a clearly weakening economic environment is a mystery.
Advance Trade Since 1992
Advance trade numbers are goods only. The full report is goods and services.
The US has consistently had a goods deficit for decades. The US typically runs a small trade surplus in services.
Recessions (yellow highlights) tend to improve balance of trade, temporarily.
Winning Big!
“We will soon be winning big on Trade, and everyone knows that, including China!”
Are We “Winning Big Yet?”
- Deficit Trump Years: From -66,402 to -84,938
- Deficit Biden Years: From -84,939 to -100,617 (and counting)
An Amazing Deal!
Dream Candidate?!
Competitive, Escalating Nonsense
Trump’s Tariff policy and Biden’s tariff policy are nearly the same.
The best description of both is “Competitive, Escalating Nonsense”
Tariffs cannot and will not fix as problem caused when Nixon took the US off the gold standard.
Neither Trump nor Biden understand this.
Is Globalization Dead? Two Views, Brad Setser’s and Mine
For more on this discussion, please see Is Globalization Dead? Two Views, Brad Setser’s and Mine
On the basis of rising Chinese exports, Setser says globalization is alive and well.
I, strongly disagree. Click on the above link for my rebuttal.
By the way, when I saw that report, I made a mental note that the GDPNow forecast would take a big hit. I will have more on GDPNow later today or this weekend.
$1 TRILLION+ annual trade deficits, paid for with “money created out-of-thin-air.
Now imagine if all that imported stuff has to be paid for with REAL money.
What would the average American’s standard of living look like?
I believe the average standard of living could actually improve in the long run.
In order to pay with real money we’d have to eliminate the trade deficit, and give up the whole “world reserve currency” scam, and quit the endless Federal deficit nonsense. Americans would have to be producing as much as we consume, thus on the whole we’d be producing and earning more, and borrowing less.
Currently, workers’ debts and federal debt are “bonds” within the elites’ asset base, and those debts drive a large part of today’s wealth inequality. A switch to sound money would force a reduction in that debt, which precisely means a big improvement in wealth inequality.
In addition, to support the necessary actual production, workers would be in greater demand, non-productive government apparatchiks would have to get productive non-government jobs, and the net effect would be further reduction in income inequality.
There’s nothing not to like here, other than having to euthanize a bunch of elite rentiers.
Mish, what’s this fetish with GDPNow forecast? I have never seen you use anywhere, anytime. You comment on how it’s going to change with the wind but never tell us about its purpose. We already know what’s happened, obviously. The GDPNow just adds noise to readily available and just-as-reliable forecasts elsewhere. Including mine!
Yeah I don’t understand this either when CFNAI is the widest and deepest metric out there.
Is it even a possibility that they know better?
More likely scenario is that they pre-ordered stuff which isn’t selling, and the weak sales are driving unintended inventory accumulation. Looking forward to holiday sales.
Mish, correct me if I am wrong, but don’t inventories rise in the early stage of a recession because the supply chain isn’t completely coordinated?
Really starting to think China and Russia have cornered both major political parties in America. The people of America are going to get screwed badly until 2033 until they figure this out.
Your comment lends credence to your moniker.
Why until 2033?
Why not 2029 or 2037?
It is just an estimate based on 17 year cycles which seem to govern multiple things in the world. This cycle started in 2016. The secular bear market ended then too and we went into q cyclical bull market. But this time there is more upheaval than the previous cyclical bull from 1983 to 2000. This cycle will be painful and end in 2033 if.the cycle holds.
I’m sure Russia and China are responsible for everything we don’t like and things that are wrong with America. It could never be the US politicians and the citizens who play into their games and are themselves also very selfish and shortsighted. Give me a problem and I can tell you that Russia and China did it. They control everything. It wasn’t us.
I never said politicians weren’t reesposible. In fact that is exactly who the Russians and Chinese governments have bought off. But what are the people to do about it ?
Globalization is alive and well imo. I started buying the same.stuff on temu and prices are significantly lower there. They are basically hawking real goods from American supply chains for much lower prices. The more people that that try to deflate the inflation the faster inflation will die.
Crazy the prices on Temu.
At first thought it was a joke, but it has the same stuff than the store or on Amazon.
At least 50% off from Amazon prices but better selection and shipping takes 1 week, not 1 day.
Temu cuts the middle man (e.g., exporter, importer, and Amazon).
If this catches on, Amazon is in trouble.
Return policy?
I have bought about 50 items from Temu. If an item in a shipment is not satisfactory, for ANY reason, they simply credit to the account upon request. It is INSTANTLY credited. That amazed me. One flashlight seemed to be not charging, and I asked for a credit and got it and THEN I discovered that the cord I used was defective.
You need a post on the underground economy. Impossible to know or quantify how much bc it is completely not on the radar. It will increase no matter who is president. The documented economy all feels inflationary. This will push more people into the economy that is unaccounted for.
Highly skilled workers benefit from reshoring and tariffs. Low end workers compete with ten million illegal immigrants. Since their number is huge and since highly skilled workers entered the black market to avoid paying taxes ==> wages will deflate.
Four years ago mfg and wholesalers raised their prices to preempt the hyperinflation. Corp profit hit a new all time high, but these day they are cutting prices and trimming their labor force to move stuff.
Give up. Trump is too stupid to understand comparative advantage and S – I = CA.
New and recycle cars and houses sales are down. Inventory is rising from
nadir, in rolling hills, to a low “normal” level. Are we in recession : not yet.
There was a different reason why Nixon took the US off the gold standard. Then one has to look at th eprice of gold since 1944. “Bretton Woods” meant that gold was priced at $ 35. But in the free market gold would cost less than $ 35. so, e.g. foreign central banks were able to buy gold at a lower price in the free markets.
Since 1968/1969 the price of gold in the free market went above $ 35 and remained over $ 35. But the FED still offered gold at $ 35. No wonder foreign central banks were lining up at the FED to buy gold at $ 35 from the FED.To stop this “run on gold” the FED / US was forced to get rid of “Bretton Woods”. Otherwise the FED wouldn’t have left with any gold reserves.
Nixon divorced gold bc LBJ financed a bloody war, social programs, housing and a space program, dbl down on JFK agenda, after a coupe against him.
And how, exactly, would there be more than 35 dollars out there to buy Gold with, if every dollar was backed by 1/35 oz of Gold in The Fed’s physical possession?
The reason for what you describe, was specifically that The Fed did not fully back Gold, but instead had been counterfeiting on the sly. The solution to counterfeit dollars, is to get rid of the counterfeits. Then, as now. Not to reify counterfeit bills and pretend that’s just a-ok.
When the dollar was strong in the 40’s/50’s foreign countries sent us gold for US dollars, bc the want of dollars was high. After JFK & LBJ the value of US dollar deflated. It was less than $35/oz. France wanted their gold back.
The U.S. has had a net liquidity deficit in every year since 1950 (with the exception of 1957), Up to 1976 (when the private sector contributed its first trade deficit ) these deficits were entirely the consequence of excessive U.S. government unilateral transfers to foreigners (re: foreign policy – solely our far flung military bases and personnel).
During all this time the private sector was running a surplus in all accounts: merchandise, services and financial. The Vietnam Ten-year War administered the coup d’etat to our gold bullion standard. By 1968, in an effort to keep the dollar at the $35 par, we had exhausted nearly two thirds of our monetary gold stocks, or approximately 700 million ounces to about 260 million ounces.
Although the dollar ceased to be freely convertible in March, 1968, institutional (central bank practices) and attitudinal lags were sufficient to offset, until late 1970, the excessive expansion in the supply of dollars. In August 1971, all convertibility was ended.
This further accelerated the decline in the exchange value of the dollar. All fluctuations in exchange rates prior to this time were the result of other currencies changing in value relative to the dollar. Changes in the exchange rates were negotiated by governments, usually through the offices of the International Monetary Fund.
It could be very simple why inventories are growing. Perhaps demand is falling faster than production is falling.
Deeply disturbing numbers