By Ken Rapoza, CPA Industry Analyst
The pandemic has curtailed exports and imports and today’s trade numbers showed a slight decline in the trade deficit. The June deficit came in at $50.7 billion, 7.5 percent better than the $54.8 billion deficit in May, based on the Bureau of Economic Analysis data.
From January to June, the deficit in goods and services was $274.3 billion, which is 7.8 percent improved from the year-ago deficit for the first half of the year. The U.S. maintains its goods deficit with the world, and remains in services surplus. The June services surplus was $21.4 billion, a two year low.
The trade deficit with China hit its highest level on the year in June, coming in at $28.3 billion and bringing the year’s deficit so far to $131.7 billion. The June number is low because of the pandemic. The last time it was that low was in June 2013, when the deficit for the month stood at around $23 billion. U.S. exports to China were valued at $9.2 billion, down from May’s $9.6 billion, but still enough to make it the second highest month this year of China-bound exports by dollar value.
The EU trade deficit remains steady, hitting $14.0 billion in June and bringing the six month total to $81.0 billion. June exports to the EU are an improvement over May’s numbers, hitting $16.2 billion. All told, the June deficit with the EU was the highest June figure since 2015.
The good trade with Mexico recorded its usual deficit, this time of $10.0 billion versus $4.4 billion in May and $3.3 billion in April. All told, the U.S. trade deficit with Mexico stands at $45.0 billion for the first six months of the year. This year for the first time, our monthly goods deficit with Mexico has exceeded $10 billion in a single month, in both March and June.
U.S. exports to Mexico for June were $15.7 billion.. Exports to Mexico are heavily dependent on the auto industry, where output and trade have been severely depressed by the coronavirus.
According to the BEA, food and beverage exports are in decline; a data point that can only be blamed on restaurant closures worldwide. The sector exported $9.9 billion, down from $10.4 billion in May. Year-to-date exports in this segment are down $1.8 billion to $63.9 billion in June.
U.S. soybean exports, a key factor in the trade negotiations with China, are lower than they were in May by $362 million to come in at $1.2 billion in June. Year-to-date values are down $1.9 billion to $7.9 billion.
In other commodities, crude oil exports rose, but this is more of a factor of oil prices bringing in more revenue than higher volumes. U.S. crude exports hit $2.9 billion in June, up from $2.5 billion in May but are down on the year by $4.6 billion to $26.1 billion. Logs and lumber exports, another part of the phase one trade agreement with China, show a slight dip in June to $389 million versus $391 million in May and a six month dip by $402 million to $2.3 million.
In exports, three major categories of manufactured goods saw an increase in June as compared to May. Capital goods (ex. automotive) were up 11.7 percent to $35.2 billion. Automotive exports were up 144 percent to $8.3 billion over the severely depressed May level of $3.4 billion. Consumer goods were up 12.8 percent to $12.3 billion in the month. However, on a year to date basis, all three categories were down by double-digit percentages, due to coronavirus-inspired shutdowns of manufacturing facilities.
The pattern is similar on the import side. Our goods imports in June rose by 5.1 percent in the month to $173.8 billion. But on a year-to-date basis, our goods imports were down 13.1 percent to $1.1 trillion.
Most consumer goods imports followed that pattern of monthly growth in June but a year-on-year decline for the first six months of the year as compared to the first six months of 2019. The standout exception was pharmaceuticals, where imports grew in the month and for the six-month period. In the January-June period, we imported $82.4 billion of pharmaceuticals, up 13.5 percent over the same period last year. Pharmaceutical imports reflect the demand generated by coronavirus patients but also underlying forces such as the rising price of pharmaceuticals and the continuing growth of the health care sector.
“Pharmaceutical imports are the largest category of US imported consumer goods, almost double the total for the next largest category, cellphones,” said CPA Chief Economist Jeff Ferry. “This highlights the importance of implementing a plan to re-shore pharmaceutical production to the US now. Such a plan would reduce imports, create jobs, increase research & development in this country, and save lives.”