I picked this idea up from a St. Louis Fed Tweet.
The St. Louis Fed says U.S. net exports of technology have fallen since 2011
The St. Louis Fed calculated things on a percentage of GDP basis. The raw numbers are easier to understand.
On that basis I calculate a different peak.
US Net Peak vs Now
- Net Peak: $80.57 Billion SAAR in 2014 Q2
- Current: $62.88 Billion SAAR in 2021 Q2
Trade Deficit is Widening
The above chart shows by balance of trade by quarter (Sum of Three Months). The data is through 2021-Q1. It is seasonally adjusted but not annualized.
The overall net surplus in services peaked in the first quarter of 2018 at $78,923 million.
The net quarterly trade deficit and goods deficits bot hit new records in the first quarter of 2021.
Services, the one U.S. bright spot in net exports, peaked just as Trump launched massive trade wars against the world.
Make Trade Math Great Again
One of the problem with these numbers is they are distortions of trade math calculations.
I have discussed this before.
When an iPhone arrives in the U.S., it is recorded as an import at its factory cost of about $240, which is added to the massive U.S.-China bilateral trade deficit.
IPhone imports look like a big loss to the U.S., at least to the president, who argues that “China has been taking out $500 billion a year out of our country and rebuilding China.” One estimate suggests that imports of the iPhone 7 and 7 Plus contributed $15.7 billion to last year’s trade deficit with China.
But, as our research on the breakdown of an iPhone’s costs show, this number does not reflect the reality of how much value China actually gets from its iPhone exports – or from many of the brand-name electronics goods it ships to the U.S. and elsewhere. Thanks to the globe-spanning supply chains that run through China, trade deficits in the modern economy are not always what they seem.
Of the $237.45 attributed to China as an import, China gets $8.46. The result is US imports from China are overstated by $15- to $16-billion on the iPhone alone.
Is the US lead in technology really shrinking or is it just shrinking as measured?
I suspect some of each but "as measured" at a faster pace. Regardless, trade wars did not and will not help.
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