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 (22)
No. 1-9

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.