The Bureau of Economic Analysis (BEA) has released Q4 (November) import/export data showing a considerable drop in the U.S. trade deficit. [Release Here]  Exports increased approximately .7 percent ($208.6 billion) while imports dropped one percent ($251.7 billion.  Lowering the overall trade deficit to $43.1 billion.

While the pundits are surprised at the strong result, it should not come as a surprise to many CTH readers.  During Q2 (June) and Q3 (July, Aug, Sept) the rate of GDP growth was impacted -in part- by inflated U.S. purchases as companies bought holiday merchandise earlier than normal.  This was an effort to avoid looming tariffs, and as a result companies increased their overall inventory.  We predicted Q4 purchases (Oct, Nov, Dec) would be lower specifically because of this backlog of retail inventory.
With the massively successful holiday season now over, those inventories have sold.  Specifically because the value of imports are deducted from the GDP calculations, there will likely be a much stronger Q4 GDP growth resulting from less import activity.
The Wall Street financial pundits are too focused on the multinational side of the ledger; and they simultaneously don’t review data from a Main Street perspective; therefore they don’t see -or pretend not to see- the common sense equation staring them in the face.

(VIA CNBC) The U.S. trade deficit fell more than expected in November ahead of negotiations with China that cooled the simmering tariff battle between the two sides.
The shortfall in goods and services declined to $43.09 billion for the month, below the $43.6 estimate from economists surveyed by Dow Jones. That represented the lowest deficit since October 2016. That was down sharply from $46.9 billion in October, which was revised lower from an initially reported $47.2 billion.
President Donald Trump has made reducing the trade deficit a major priority of his administration, and November marks the first month that it actually happened. The gap had continued to grow despite the White House’s intense pressuring of Beijing to loosen its trade barriers and to stop appropriating U.S. technology.  (read more)

The U.S. economy is very strong.  Strong U.S. consumer sales drives GDP growth.  Combine consumer spending with with lower imports, meaning less deductions from overall economic activity, and the rate of GDP growth will expand in Q4 much more than anticipated.
The long-term trade situation continues to reflect the seismic shift away from Chinese manufacturing.   This trend began exactly after President Trump visited the ASEAN partners back in November 2017:

U.S. multinational investment in China is continuing to shrink.  This outcome is exactly what the America First policies are designed to create.  The purpose of redesigning the USMCA was to make investment in North America the better choice.  With the passage of the USMCA we will see the results rather quickly (all things considered).
Wall Street banks and international investment groups have been waiting to calculate the location for the best return.  The better returns on capital investment will come from North America.  The USMCA is designed to enhance manufacturing in the U.S, Mexico and Canada.
Several aspects of the total cost of production (TCP) are now better in North America: (1) abundant raw materials; (2) lower energy costs; (3) lower shipping/transport costs; (4) decreased regulatory costs; (5) the absence of import tariffs; and finally, (6) competitive corporate tax rates.
Combine all of those production measures/costs, and any lower labor costs in Asia are more than offset in the total cost of producing goods in North America.  Additionally, regional economic stability is a big factor (compare to ongoing EU fluctuations and uncertainty).  And don’t forget the USA is the market they need.
It is quite remarkable that President Trump has been able to produce these results in less than one full term in office.  Factually, and specifically on the economic outcomes, we are starting to see the difference between having a businessman running the executive branch as opposed to decades of professional politicians.  The results simply speak for themselves.
Looking forward…. Beyond the USMCA, the China ‘phase-one’ deal is more focused on enhanced exports; that too will drive economic growth.  With the Hong Kong crisis visible, the future of Wall Street now looking unfavorably upon the communist regime shows no signs of changing.
There is just too much risk associated with China now; no-one really expects Beijing to change their ways; and the USMCA provides a structurally solid and stable alternative.
That puts the EU into the mix as the next area of focus.  Because the constructs of all current trade agreements with the EU are so one-sided (Marshal Plan), any renegotiated trade agreement based on reciprocity is a loss for the EU and a gain for the U.S.

Posted in Auto Sector, Big Government, China, Decepticons, Donald Trump, Economy, Election 2020, energy, Environmentalism, European Union, Hong Kong, Legislation, media bias, Mexico, NAFTA, President Trump, Trade Deal, Uncategorized, US dept of agriculture, US Treasury, USA, USMCA
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