by Seth Sandronsky
It is growing relentlessly. The U.S. trade deficit, the gap between what the nation imports and exports in goods and services, increased to $67.4 billion in December, an increase of $6.4 billion from $61.0 billion in November, revised, according to the U.S. Census Bureau and the U.S. Bureau of Economic Analysis. The month-over-month figures on the deficit are part of a long-term trend in America.
For 2022, the deficit in goods and services hit $948.1 billion, rising $103.0 billion from 2021. “Exports were $3,009.7 billion, up $453.1 billion from 2021. Imports were $3,957.8 billion, up $556.1 billion from 2021,” the Census Bureau and BEA reported.
The deficit with China, a major U.S. trading partner, rose $29.4 billion to $382.9 billion in 2022. Exports increased $2.4 billion to $153.8 billion and imports rose $31.8 billion to $536.8 billion, according to the Census Bureau and BEA.
“Growing imports eliminate existing jobs and prevent new job creation — as imports displace goods that otherwise would have been made in the United States by domestic workers,” according to Robert Scott, a senior economist and Director of Trade and Manufacturing Policy Research at the Economic Policy Institute in Washington, D.C.
In other words, low-cost imports assembled in nations such as China and Vietnam that are for sale on store shelves throughout the U.S. have a high price in terms of weakening hiring among domestic goods-producing firms.
Historically, goods-producing jobs have paid high wages to nonfarm payroll workers. Thus, the trend of manufacturing job losses is a drag on the living standards of workers. Service employment tends to pay lower wages versus goods-producing jobs. In addition, a reduction in factory employment subtracts from buyer demand in the U.S. economy. Weakened purchasing power drags down the bottom lines of businesses, from small to midsize and large. Small firms are most at-risk of weakened buyer demand, lacking the cash flow and customer base to weather downturns as bigger firms can and do in the marketplace. U.S. free trade agreements have enlarged U.S. trade deficits, a near-three decade trend.
One example is the North American Free Trade Agreement, or NAFTA, under the administration of Democratic President Clinton, which took effect on January 1, 1994. Years later, President Trump noted the negative impacts of NAFTA for American manufacturing workers on the campaign trail, criticizing the pact for encouraging companies to relocate domestic production to foreign nations.
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