Latest Trade Data: Stagnation Means Weak Growth

By SBE Council at 7 August, 2024, 12:24 pm

by Raymond J. Keating -

The latest trade data from the U.S. Bureau of Economic Analysis (BEA) shows that both exports and imports this year have been generally meandering. Indeed, that's been the case for some time now, and to the detriment of U.S. economic growth and opportunity.

According to the BEA report, exports grew in June (in seasonally adjusted, nominal dollars) to $265.9 billion. Imports - which are nearly all inputs to domestic businesses - also grew, registering $339.0 billion. However, looking at the last two-and-a-half years of numbers in this report, exports have stagnated, while imports have declined.

Let's put the trade situation in fuller perspective.

During the post-World War II era, specifically from 1948 to 2006, the U.S. led the world, with a few minor setbacks here and there, toward freer trade, that is, reducing government-imposed costs and barriers (such as tariffs and quotas) and thereby allowing individuals and businesses to trade. During this period, real annual growth in U.S. exports averaged 5.9 percent, and import growth averaged 5.5 percent. Over this same period, real U.S. economic growth averaged 3.6 percent.

However, from 2007 to 2023, things changed.

The U.S. at first retreated from free trade leadership during the Obama years, and then moved into protectionist territory under Presidents Trump and Biden. Annual growth in real U.S. exports during this time averaged a mere 2.8 percent, with import growth averaging 2.6 percent. That is, the real growth rate in trade was reduced by more than half.

At the same time, real U.S. economic growth, again, from 2007 to 2023, averaged a meager 1.8 percent, that is, it was cut in half. There are numerous reasons for the U.S. slowdown over the past 16 years, but part of it is about governmental costs imposed via protectionism.

Growth in trade feeds growth in the economy. Export growth means expanded opportunities for U.S. entrepreneurs, businesses (overwhelmingly small businesses), and workers, while imports serve as inputs to U.S. businesses, from retailers to manufacturers (again, overwhelmingly smaller businesses). Increasing barriers to trade means raising costs, reducing opportunities, and undermining our economy.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II:52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

Public link

Please use the above public link if you want to share this noodl on another website.