US Trade Gap Worsens: Oil. What’s New?

Today’s trade report is not good. The gap between imports and exports rose to $50.2 billion in May. That’s a 15% jump. By itself that suggests that trade will have a negative impact on GDP when the final numbers are put together. Then again maybe not. Most of that negative shift in May came from oil. As you all remember oil prices have surged and then fallen over the past few months. May saw the peak, so naturally it will record the worst of the trade impact. We should all look for an improvement in June and July. Canada, Mexico, and Saudi Arabia remain the biggest suppliers of oil to the US.

The good news buried in the report is that the decline in the value of the dollar has helped exports of US products. While exports were slightly down overall the value trade in US manufactured goods such as generators, engines and computer chips was at an all time high. So much for the argument that the US doesn’t make anything any more. The problem is that it doesn’t make enough: imports of capital goods such as computers and heavy machinery was at an all time high as well.Outside of manufacturing, trade in services such as accounting and legal services or entertainment rose slightly to record a surplus of $14.7 billion.

Our bilateral trade partners remain much the same: China leads the way with the US having a deficit of around $25 billion; following up are a deficit of $11.3 billion with OPEC; $8.8 billion with the EU; $6.3 billion with Mexico; $2.7 billion each with Canada and Saudi Arabia; and $2.6 billion with Japan. As you can tell oil and consumer goods dominate these relationships.

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