Trade Report: No China Progress, Deficit With EU, Canada, Mexico, Japan Rising


As revised, the US trade deficit fell slightly in July but the deficit with China increased.

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the Goods and Services Trade Deficit was $54.0 billion in July, down $1.5 billion from $55.5 billion in June, revised.

Exports, Imports, and Balance

  • July exports were $207.4 billion, $1.2 billion more than June exports. July imports were $261.4 billion, $0.4 billion less than June imports.
  • The July decrease in the goods and services deficit reflected a decrease in the goods deficit of $1.6 billion to $73.7 billion and a decrease in the services surplus of $0.1 billion to $19.7 billion.
  • Year-to-date, the goods and services deficit increased $28.2 billion, or 8.2 percent, from the same period in 2018. Exports decreased $3.4 billion or 0.2 percent. Imports increased $24.9 billion or 1.4 percent.

Three-Month Moving Averages

  • The average goods and services deficit increased $0.7 billion to $55.1 billion for the three months ending in July.
  • Average exports increased $0.5 billion to $208.0 billion in July.
  • Average imports increased $1.2 billion to $263.1 billion in July.

Quarterly Goods and Services by Selected Countries and Areas

  • EU: The US deficit with the European Union increased from -27,455 to -35,073.
  • Japan: The US deficit with Japan increased from -15,575 to -16,251.
  • Mexico: The US deficit with Mexico increased from -22,979 to -26,088.
  • Canada: The US went from a surplus of $3.9 billion with Canada to a deficit of $3.3 billion in the second quarter.


  • Quarter-Over Quarter the goods and services deficit with China fell a trivial 0.22 billion from the first quarter (-80,823) to the second quarter (-80,601)
  • However, from June to July, the trade deficit with China increased from -29,643 to -30,154.

Big Wins Not

This is not winning big.

Heck, it's not winning at all.

Skewed Reporting

For starters, trade deficit reporting is Deeply Skewed.

Take a look at the iPhone X. IHS Markit estimates its components cost a total of $370.25. Of that, $110 goes to Samsung Electronics in South Korea for supplying displays. Another $44.45 goes to Japan's Toshiba Corp and South Korea's SK Hynix for memory chips.

Other suppliers from Taiwan, the United States and Europe also take their portion, while assembly, done by contract manufacturers in China like Foxconn, represents only an estimated 3 to 6 percent of the manufacturing cost.

Current trade statistics, however, count most of the manufacturing cost in China's export numbers, which has prompted global bodies like the World Trade Organization to consider alternative calculations that include where value is added.

Global Supply Chain Disruption

Global supply chains are long and complicated. Overall, China is barely running a trade surplus with the world.

All Trump has managed to do is shift supply chains from one country to another. The US has not benefited.

Even if one believed trade deficits represent a huge problem, it should be clear by now that trade wars cannot possibly be the answer.

Yet, Trump's only solution to date has been to double with failed tactics.

Mike "Mish" Shedlock

Comments (21)
No. 1-8

The biggest trade surpluses are run by:

  1. Germany
  2. China
  3. Switzerland

No.1 and No.3 are among the highest cost countries in the world (and higher than US), but make high value added products.


Dumb question but is it even possible to have the reserve currency and be a net exporter?



China does not have a huge trade surplus, except with the US. China is distorted. MM's observation about Germany is correct and I noticed that too.

If Trump really wanted a trade war, he may have had better success with Germany than China. Politically, China can wait things out. Germany cannot.

That said, tariffs cannot solve this problem. It's impossible. Have a post pending on this.



"Dumb question but is it even possible to have the reserve currency and be a net exporter?"

I believe that is an excellent question. I address that tomorrow in a post I already wrote but I will add that as a Q&A.


[Biggest trade surpluses] Meaningless without parameters In absolute terms, or relative to GDP ? Goods, goods & services, or current account ? Then there are cases like the Netherlands, Switzerland, and Germany that have disproportionate export surpluses, but the proportion of their GDP from import/export is much greater (Netherlands >80%), and most of their trade is within the EU, which is like measuring the surplus of California or New York. Yes, it's complicated.

Country Bob
Country Bob

The USA can no longer be the global consumer of last resort. Too much debt and not enough GOOD job creation. Coffee barista doesn't pay the day to day bills, much less college debts. Washington DC can't even balance its own spending, it is absurd to suggest DC can help consumers balance ours. This was the case before Trump, it is the case now with Trump in office, and it will be the case no matter who the next US president turns out to be. It will take time for the education system to produce properly trained workers, and it will take time for debts to be worked down.

China doesn't have an alternative consumer to export to, at least not in the short term. Their miracle economy depends on exports. This was the case before Xi assended to power, and will be the case throughout his reign. It will take time for China to develop other export markets, and it will take time to encourage more Chinese domestic consumption.

I don't see the point in Mish micro analysing the quarterly trade numbers. Neither Trump nor Xi can do anything about long term trends in the short term.

Trump likes to stir the pot and get people thinking, so I submit all his tweeting IS working. It got the folks in Washington DC to pull their heads out of the sand and realize the status quo (losing good jobs, and getting coffee barista jobs) is not working.

Admitting there is a problem is step one. I think most people outside of the political class already know there is a problem. Its terrible that we required a guy like Trump to get the political class to pay attention. The sooner we stop hearing selfish and self proclaimed experts with tenure telling us that lopsided trade is good for us, the better.

College professors and market pundits still don't understand that coffee barista doesn't pay as well as manufacturing did.... and until the smart guys figure that out, Trump should keep tweeting.

Country Bob
Country Bob

@Maximus_Minimus -- THANK YOU for pointing that out

Germany and Switzerland have high costs .... but they also export a lot of high tech / high value items. There is no reason the USA can't do the same.

We have had really bad leadership for the better part of a generation. I have no issue with stock buybacks (union pension funds own stocks folks! So do S&P index funds!).

I do have an issue with companies neglecting R&D. I do have an issue with tax subsidies for NFL / MLB stadiums while taxing factories out of existence.

We have a serious trade problem with China, but the long term solution lies with changes here in the USA