Due to the government shutdown, we are just now getting the Goods and Services Trade Report for December 2018.
Exports, Imports, and Balance
December exports were $205.1 billion, $3.9 billion less than November exports. December imports were $264.9 billion, $5.5 billion more than November imports.
The December increase in the goods and services deficit reflected an increase in the goods deficit of $9.0 billion to $81.5 billion and a decrease in the services surplus of $0.5 billion to $21.8 billion.
For 2018, the goods and services deficit increased $68.8 billion, or 12.5 percent, from 2017. Exports increased $148.9 billion or 6.3 percent. Imports increased $217.7 billion or 7.5 percent.
Year-over-year, the average goods and services deficit increased $6.2 billion from the three months ending in December 2017.
Imports vs Exports
By Country
- China: The deficit with China increased $3.2 billion to $38.7 billion in December. Exports increased $0.4 billion to $7.7 billion and imports increased $3.6 billion to $46.4 billion.
- Mexico: The deficit with Mexico increased $2.1 billion to $8.8 billion in December. Exports decreased $1.3 billion to $21.1 billion and imports increased $0.8 billion to $29.9 billion.
- Canada: The deficit with Canada decreased from .8 billion to .7 billion. Exports fell by $0.5 billion while imports fell by $0.6 billion.
By Country 2018 Totals
- China: The deficit with China increased from $375.6 billion to $419.2 billion. Exports fell from $129.9 billion to $120.3 billion. Imports rose to $539.5 billion from $505.4 billion.
- Mexico: The deficit with Mexico increased from $70.9 billion to $81.5 billion. Exports to Mexico rose from $243.3 billion to $265.0 billion. Imports from Mexico rose from $314.3 billion to $346.5 billion.
- Canada: The deficit with Canada increased from $17.1 billion to $19.8 billion. Exports rose from $282.3 billion to $298.7 billion. Imports rose from $299.3 billion to $318.5 billion.
Econoday Highlights
Revision estimates for fourth-quarter GDP will be coming down following an unexpectedly deep $59.8 billion trade deficit in December. Not helping the quarterly deficit are downward revisions to November and October that deepened the net deficit in those two months by $1.6 billion.
The trouble is equally severe on both sides of the report as exports in December fell 2.8 percent to $205.1 billion and imports rose 2.4 percent to $264.9 billion.
Food is the standout negative with imports at a record $12.6 billion in the month and exports, at $9.6 billion, the lowest monthly total since August 2010. This looks like a smoking gun over tariff tensions with China which may well have cut back its U.S. purchases.
The bilateral trade deficit with China for full year 2018 came in at just over $419 billion, which is much deeper than deficits of $375 and $347 billion in the prior two years.
Exports of services failed to help out December, unchanged at a still very strong $69.5 billion with imports of services, however, rising 1.0 percent in the month to $47.7 billion. Turning back to goods trade, vehicles are another major weakness with monthly exports at $12.3 billion for a second month and the lowest since September 2017 with imports of $32.1 billion at a record high.
Today’s headline $59.8 billion deficit is the deepest of the expansion, since October 2008. It is also $1.4 billion beneath Econoday’s consensus range and $2.2 billion deeper than the consensus. Net exports had only been a small drag in last week’s initial estimate for fourth-quarter GDP but today’s report is pointing to a more significant one. One final detail, the nation’s total trade gap in 2018 came to $621.0 billion, 12.4 percent deeper than $552.3 in 2017 and the deepest since 2008.
Trump Under Pressure
Trump is under immense pressure to work out a deal with China.
Expect an announcement by Trump of the greatest trade deal in US history.
But expect the actual results to be worth little to nothing.
Mike “Mish” Shedlock
Interesting that despite the “tariff wars”, US international trade has increased every year for the last 3. Looking back farther, I see the balance remains negative for the US. My takeaway: Most Americans don’t care about the balance of trade and don’t pay any attention to where things come from. Where I live it seems about 75% of vehicles are foreign.
Gov’t spending in 99.9999% of GDP,to it GDP can never again go negative (ever),DC is tracking 2 plus Trillion a year “officially”deep in the red!Negative “official” GDP will mean massive increase in gov’t borrowing ,taxing and of course relentless around the clock fed money printing.
Good, China will keep buying treasuries. There, I just “balanced” the budget. Front run China and the Fed…. Buy treasuries, dollar strong, no inflation and interest rate increases have gone the way of Government Intelligence…..non-existent.
The only question is the broader economy able to withstand everything until a deal is in place ? Trump knows his re-election hinges on the economy debt be damned. Expect all kinds of deals in the coming months. If GDP goes < 1% in Q1 then expect the unexpected. So much winning can only lead to more winning.
If a trade deficit was actually a big deal I might be worried. The big winner that the tariffs aren’t in effect until Jan 01 and that the Chinese stuffed the pipe? The final consumer who didn’t get taxed.
Take a look at the increase in interest expense over the last few months, which annualizes out to over $500B. It will be over a Trillion in two years. Add in the pension crisis and we get to repeat the sins of the past – “taxation without representation”, which will lead to civil unrest and war.
“Our approach to containing them seems to be lobbying governments to ban them. I’ve never seen that work anywhere, for any product, at any time…eventually.”
Bingo
January 1, 2019 is when the the new American tariffs kicked in with China.
Every importer with products manufactured in China was rushing and front loading to beat this deadline.
I will bet a high end streak dinner that the import numbers drop very significantly in Jan and Feb.
++++
“December imports were $264.9 billion, $5.5 billion more than November imports.”
Gee I don’t know about your predictions:
”
2banana
Feb 6
The vast majority of the Trump Tariffs on China took effect on Jan 01, 2019.
Importers were feverishly importing in 2018 to front load.
American warehouses are full.
Less imports will be the norm for the near future.”
Gee. Where is the data for Jan and Feb.?
Gee. It’s not available yet.
So Gee, your post makes no sense.
Gee you will not see an improvement either… The orange guy will capitulate with china an sign some non-sense “agreement” and he will call it the best ever. The most beautiful agreement ever and call victory. Sort of like “mission accomplished” . BTW you noticed that your Orange guy floated the idea of nationalizing 5G? But no worries, you haven’t been the first one to be bamboozled by an authoritarian populist
The December-to-December net import run rate change of $3.6 Billion, or 2.6 days, could easily be explained by pull-ahead pipe-stuffing aimed at beating possible new tariffs, but the trend remains intact—up. I can’t see anything The Donald can do about this so long as our demand pull for Chinese imports remains intact and China remains willing to fund it.
The trade issue I worry about most is neither fun nor fashionable for talking heads to babble about currently, but it’s eventually the whole high tech trade ball game: R&D and skills access.
Huawei is spending $15 Billion annually now on R&D. For a $100 Billion revenue firm, that’s serious money.
Our approach to containing them seems to be lobbying governments to ban them. I’ve never seen that work anywhere, for any product, at any time…eventually.
When you have two groups attempting to build a functioning machine; one consisting of engineers and production workers; the other of banksters, ambulance chasers, “managers,” “investors” and HR people just trying to stay ahead of the ambulance chasers… The first group will do a better job. Doesn’t matter if what’s being built is an airplane, or a society.
That deficit is easy to fix: more tariff please
The Great Leader, Kim Il Trump, guides us in his expert knowledge of economics, science, and history. Every day we are doing so much winning that we are tired of winning.
The problem is that someone gets to “guide” “us;” whether “we” want to be guided or not. Exactly who is doing the forced guiding, is pretty much entirely irrelevant.
Thanks Mish. I don’t know of any other concise source of this kind of information. I really appreciate your work.