A few months ago I got a request for a tariff follow-up:
“As a supplier to the steel industry in my real job and a part time farmer outside of work, I find myself on both sides of the issue although the one that hits my pocket book the hardest is the farm side. It would be nice to see a follow up to your previous multiple show series about tariffs and correlate the current US steel production changes if any since the previous reports.”
That’s from Richard Petersen, Jr., in Woodville, OH. And he’s right. It’s been a little over a year, so let’s grade the trade war for results. Here are the key goals I remember prompting our tariff actions.
First, to change the perceived imbalance of trade in goods with China primarily, but also Mexico and Canada.
Second, to reclaim jobs and production lost to overseas manufacturers. Most attention centered on the steel industry.
Third, to halt the Chinese practice of ignoring our intellectual property laws and forcing technology transfers.
We’ll start this week with the trade balance. Since the administration looks at trade with each country separately, we’ll do the same. For China the results have been clearly ineffective. The balance of trade for goods just reached a record 12-month peak. While imports of products from China have slowed, our exports to China have been dropped much faster. More importantly new trade flows from Chinese manufacturers through Southeast Asia are making it even harder to track this, so the surplus is likely higher.
As far as our overall trade balance, the trend had been downward, and the tariffs do not appear to have affected that path. This is monthly data, which is a little noisy, but there is no sign of reversing direction.
As I have said before, the balance of trade, especially with single countries is a poor indicator of economic performance. A negative balance of trade in goods often occurs during a healthy economy, as we spend more than we save. But for those who think it should be zero-sum, I would have to give our trade policy an F on the results.
We’ll finish grading tariffs next week.