قالب وردپرس درنا توس
Home / Business / U.S. stimulus and shift in consumer spending hit the trade deficit

U.S. stimulus and shift in consumer spending hit the trade deficit



Corporate America’s global one-way street.

Designed by Wolf Richter for WOLF STREET.

Therefore, after the United States adopted stimulus measures, this is inevitable: According to the US International Trade Agency’s pre-estimation, the US merchandise trade deficit (exports minus merchandise imports) hit a record of 84.8 billion US dollars in November, compared with the August The record has declined. The Ministry of Commerce is responsible for trade in goods. Early next year, a more complete batch of trade data may be used to adjust this pre-estimation.

During the financial crisis, due to the decline in imports, the trade deficit shrank sharply. The reason was that American consumers reduced their purchases of goods and the number of imported goods, although they continued to buy services, which were mostly not imported goods. The opposite is happening now: Consumers have purchased a record amount of durable goods, but have reduced their spending on services. Most of the goods they buy are imported:

This is one of the special effects of the US government assistance to stimulate consumers and companies, the Federal Reserve’s assistance to the financial market, and the Federal Reserve’s interest rate cut to stimulate the economy. Trillions of dollars fly so fast, it’s hard to see them.

The pandemic has shifted from purchasing services (such as flights, lodging, and gym memberships) to such as hot tubs for family vacations on the deck, laptops for studying at home, and bike instructors for exercise at home, which are exacerbated by the pandemic transition These effects.

One of these effects is that the United States has stimulated the manufacturing economies of China, Germany, Japan, Mexico, and other countries that manufacture these goods. However, due to various reasons, they in turn did not purchase enough American goods, including the United States no longer producing many of these goods, because American companies globalized their supply chains and offshore production.

According to preliminary estimates from the US Department of Commerce today, imports of goods surged to US$212 billion in November. This is still lower than the record set in October 2018 ($219 billion).

Exports of goods have increased to US$127 billion, but they are still below the level of 2018 when they accounted for only a small portion of imports. Over the years, the gap between imports and exports (the commodity trade deficit) has been widening:

Import value is negative in GDP calculation. The export value is positive in the GDP calculation, so the color in the above table is green or export, and red is import.

The uninterrupted globalization of the US corporate economy and its ambitions to produce the last batch of goods in other countries (especially low-cost countries/regions) have always been the driving force of the US consumer economy. The US tax system also encourages them to do so.

As far as retailers are concerned, Wal-Mart was one of the pioneers decades ago. But now, they are all doing it. E-commerce makes it easier. Amazon has perfected it; on its platform, Americans can buy directly from Chinese and Indian manufacturers.

American companies sell many products in other countries. For example, all American automakers are important in China. General Motors and its joint ventures are China’s largest automakers. But these vehicles are manufactured in China, and some of them are now imported into the United States.

Tesla is doing the same thing. It received $1.6 billion in funding from the Chinese government to build manufacturing plants and design centers in China. It sold Model 3s in China, and Model Y produced in China soon. Now, it is also sold in Germany in Europe.

Most of Apple’s revenue comes from markets outside the United States, and most of its products sold overseas come from the United States.

American consumer products companies, automakers and many other manufacturers have largely abandoned the business of producing their products in the United States and exporting them. Globalization has become a one-way street.

American companies are important overseas, but they have moved more and more production from the United States to other countries. This is why even the prosperity of American branded consumer goods sold overseas will not promote the development of American exports and manufacturing. But the boom in U.S. merchandise sales, such as the stimulating boom now funded by deficits, has increased U.S. imports. Thanks to that global one-way street.

Consumers’ income in November was more than in good times, but much less than when the free pandemic currency was greatly reduced. read… The majestic excess of stimulus currency ends.Facing the second wave, Americans cut their spending even on durable goods

Do you like to read “WOLF STREET” and want to provide support? Use an ad blocker-I fully understand why-but want to support the site? You can donate I am very grateful. Click on the beer and ice tea cup to learn how to:

Do you want to be notified by email when WOLF STREET publishes a new article? Register here.


Source link