How Out-Of-Whack are US Trade Relationships? 2017 Trade Deficit Worst since 2008

Trade deficit in non-petroleum products hit a record of $734 billion.

2017 was a banner year for the US trade deficit, according to the Commerce Department’s report today. Corporate America’s supply chains weave all over the world in search of lower costs. Other countries have an “industrial policy” designed to produce trade surpluses for them. This combo ballooned the US trade deficit in goods and services to $566 billion, up by $61 billion, or 12%, from 2016. It was the worst trade deficit since 2008.

While exports of goods and services rose by $121 billion, to $2.33 trillion, imports surged by $182.5 billion, to $2.90 trillion.

Exports add to the economy and to GDP; imports subtract from GDP. A big trade deficit is a negative for the economy. This trade deficit of $566 billion is big even in relative terms: 2.9% of GDP, up from 2.7% in 2016.

The trade deficit in goods alone (without services) was $796 billion. As the trade deficit in petroleum and petroleum products shrank due to surging oil production in the US, the trade deficit in non-petroleum products hit a record of $734 billion.

The goods trade deficit with China, Japan, and Germany combined amounted to $453 billion!

Years ago, when the trade deficit in goods began to balloon, it was deemed no big deal because the US would export innovative services, and this trade surplus in services would make up for the deficit in goods. That didn’t work out. Then, as the overall US trade deficit ballooned, it was deemed no big deal because soaring imports showed that the US economy was healthy, driven by consumer demand, according to an endless series of economists and politicians. Meanwhile, Corporate America perfected offshoring production and importing from cheaper countries.

Then came Trump with a renewed focus on the trade deficit – something that should have been done 25 years ago, when trade wasn’t that far out of balance. But even with this renewed focus, the problem just got worse.

Here are the countries with which the US has the largest trade imbalances in goods (services not included). In terms of China, since a lot of merchandise is transshipped and/or invoiced via Hong Kong, I netted China’s and Hong Kong’s numbers in one line. I included the EU (purple bar) for memo purposes, though it is not a country and though some member states are also included in the chart:

The opaque nature of some of the trade dealings – transshipments, trade invoicing, tax issues, etc. – can skew trade data. For example, the US had trade surpluses of $24 billion and $15 billion with the Netherlands and Belgium, not because the end-users of US products are in the Netherlands and Belgium but because Rotterdam and Antwerp are the largest and second-largest seaports in Europe, and thus key for the US-EU shipping route for countries that have less convenient or no seaports.

Ireland, with which the US has a trade deficit of $38 billion as the chart above shows, isn’t actually a huge goods supplier of the US. It’s where many US companies shelter part of their profits from US taxes, and some of the trade invoicing is routed through their mailbox entities there.

Biggest partners in the trade deficit of goods:

  • China: the deficit jumped by $23 billion, with imports surging by $43 billion and exports rising by $20 billion.
  • Mexico: the deficit increased by $8 billion, with imports surging by $20 billion and exports rising by $12 billion.
  • Japan and Germany: the deficit remained about flat, with both imports and exports rising with each country by about $4 billion.

The US increased its trade deficit with the EU by $5 billion, mostly via gains by Ireland and Italy, as imports surged $18 billion, and exports rose $13 billion.

The chart below shows US imports (red) and exports (black), in order of the trade deficit (imports minus exports, with the EU color-coded differently):

And here are the problem countries:

  • China/Hong Kong exported to the US 3 times as much as it imported from the US.
  • Japan exported to the US 2.2 times as much as it imported.
  • Germany exported to the US 2.2 times as much as it imported.

By contrast, Mexico exported to the US 1.3 times as much as it imported from the US. And trade with Canada was close to being in balance, given the huge bilateral trade.

So there are two categories of countries with which the US has a trade deficit: Those that import from the US relatively little compared to their exports to the US – China, Japan, and Germany; and those with which the US has a booming bilateral trade, primarily Canada but also Mexico. Canada, with a population the size of California’s, imports as much from the US as the entire EU combined!

Clearly, Canada isn’t a problem in the long-running US trade fiasco. And given how much Mexico imports from the US, it isn’t the top problem either. Instead of hounding both countries, current NAFTA re-negotiations should carefully tweak the trade relationships. But concerning China, Japan, and Germany — the countries that together account for 80% of the US trade deficit — some good ol’ hounding would be appropriate.

Corporate American plays an outsized role in the trade deficit, and removing incentives to offshore production would be a good first step. This is going to cause a lot of squealing overseas and in boardrooms of Corporate America. But it should have been done 25 years ago before trade relationships got this far out of whack.

The corporate bond market is next, after the Treasury market has already taken a hit. It’s only a question of how disruptive the adjustment will be, whether it will be just a painful sell-off or junk-bond mayhem. Read…  Corporate Bond Market in Worst Denial since 2007

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  68 comments for “How Out-Of-Whack are US Trade Relationships? 2017 Trade Deficit Worst since 2008

  1. Rates says:

    I’ve read somewhere that the nature of some of these trade imbalances is the way US companies account for these imports i.e. Apple iPhones are imported at the full RETAIL value as opposed to true manufacturing cost.

    Why? Tax avoidance.

    • Arnold Ziffel says:

      It is called price transfer where the US company pays a lower tax rate in the exporting country and the stepped up price basis reduces the profit margin when goods are sold in the US thus lower the effective US tax rate. This is all legal under the US tax code. Another benefit is the lower wages in the exporting country. Trump lowering the tax rate may slow this down but given the capital invested and the lower wages in these countries it is my personal opinion that most jobs will not be repatriated back to the US.

      • Rates says:

        I know it’s legal, but does not make it right. Also it inflates the value of these so called deficits.

  2. TJ Martin says:

    Let me ask you this in light of your criticisms aimed at Germany ;

    Exactly what should Germany be importing from the US ? Cars ? Sorry but Ford has Ford of Koln in Germany … FCA has its own EU versions of Alfa FIAT Maserati Ferrari .. GM used to have OPEL until OPEL bit the proverbial dust due to GM’s mismanagement of the brand .

    And what US manufactured ( what few there are ) cars would suit their needs/regulations or for that matter would the Germans want ? None !

    Whereas Mercedes ( I own one ) BMW , Audi , VW ? All adjusted , modified and suited to American needs and regulations to a tee with all being aspirational vehicles ..

    So what else can we offer the Germans ? Computers ? Nope . All manufactured in Asia . Appliances ? None of our appliances suit the strict efficiency etc guidelines of Germany not to mention the majority of them are manufactured overseas . Clothing ? Why buy ours when they’ve got plenty of their own brands .. most of which are higher quality I might add . And once again the overwhelming majority of our clothing is manufactured overseas

    So what should we be exporting to them ? Or better yet … what do we have that WE manufacture here in the US that we can be exporting to them ? H-D ? Nor hardly with 45-90% of all components etc manufactured overseas . Cadillac ? Who in Germany would want a EuroWannabe Cadillac based on outdated OPEL / Vauxhall / Holden and Chevy platforms ? Corvette ? Been there … done that … they aint buying … and can you blame them ?

    Ahhh … but here’s the real rub ! Anyone like to take a wild guess how many jobs are being provided here in the US in just the automotive sector alone by Germany ? Thousands . Like to take a wild guess where the ONLY tech and manufacturing companies that provide HS paid apprenticeships and on the job training on US soil come from ? Germany

    So perhaps before going off the rails with your statistics Wolf you need to take all aspects of our trade and business relations with Germany into account … before you help fuel a potential trade embargo that will wind up costing us ( US ) a helluva lot more than it will Germany … seeing as how the combined forces of VW/Audi , Daimler Benz and BMW/MINI alone have threatened to pull out of the US toot suite should any such attempts be made by this uninformed administration desperate to appease an even less informed base

    And seriously Wolf .. you of all people should know better !

    • Wolf Richter says:

      I don’t have time to address all your points. So just one.

      You said: “And what US manufactured ( what few there are ) cars would suit their needs/regulations or for that matter would the Germans want ? None !”

      None? BS. Just because you don’t know doesn’t mean it doesn’t exist. The US DOES export cars to Germany, though in fairly small numbers since traditionally GM and Ford didn’t want to compete with their own brands in Germany (Ford and Opel) – and vice versa.

      For example, the Mustang is the best-selling sports car in Germany:

      The US manufactures all kinds of goods, and manufacturing production hit a record in December. So get a clue.

      • JS says:

        I wrote and sold software some years ago. It was much better than similar products from Germany or Japan and was marketed in both countries (prior to the rise of China). It sold initially to a few companies, and later to none. The big companies, Honda, BMW, Audi refused to buy it. Why? Not because it was inferior, but because *I* was not German or Japanese.

        I understand the nature of both countries very well, thank you. And no, I don’t buy the argument that their products are superior due to better design or manufacturing. You see, I worked in manufacturing, consulting for companies around the world. Mistakes occur in any country. Mercantilism – ah, well that tends to be found in relatively few – not coincidentally, the ones with big trade surpluses.

    • Dan Romig says:

      You can’t blame customers for their choices, but if I lived in Germany and could drive on the Autobahn, hell yeah, I’d buy a Corvette ZR1.

      And TJ, being a fellow audiophile, I would recommend that Germans buy Magnepan planar magnetic loudspeakers made in White Bear Lake Minnesota.

    • Steve says:

      Martin, that comeback is so old and wornout. The US exports roughly $2T, with a T of goods (Food, Electrical Equipment, Fabricated Metals, Medical Equipment, Petroleum, etc). But I’ll give you your point on cars.

      China, Japan specifically restrict US imports and China requires Tech transfer as the price for a token market share.

      BUT, consider this, IF the US stopped importing from Germany, China, etc. Just who would buy their stuff? Just maybe China and the EU shouldn’t look a gifthorse in the mouth. Without the US, your economies die.

      And let’s not even talk about the benefits you all get from OUR military cover.

  3. Have to agree this is a lot of exporting from our(corporate)selves to our(consumer)selves. Corporate America figured out a way to bust the trade unions, hire communist workers!? It mangles the concept of GDP and makes it impossible for the Fed to pretend to do its job. Now we have a billionaire populist president who just gave the corporations a huge tax break, while he threatens (idly) to impose tariffs on the host countries, which is essentially punishing labor a second time.

    • rhodium says:

      Meanwhile American workers on the lower end will become communists given enough time as wages continue to stagnate below the cost increases of many of their largest necessary expenses. The economists at the Fed don’t seem to understand the impossible task at this point of growing gdp without bubbles. I don’t think they’ll make it very far into tightening before they are forced to retreat and we’ll continue on the current path of wasting productive capital on exuberant speculation. Also I don’t see how the dollar can hold it’s value going into the future. Too many long term trends continue to conspire against it and at some point those forces will act.

  4. David Calder says:

    John Maynard Keynes gets so much bad press from the right as an advocate for prolific deficit spending, which he only advocated in times of recession. In normal circumstances he believed in a balanced budget and maybe a bit of a surplus for bad times but what he believed was fatal to a nation was running deficit trade imbalances. I think the last time we ran a surplus was 1975.. So why aren’t we bankrupt? I don’t think Keynes could imagine any country able to export it’s debt as if it was a commodity. At some point I think Keynes will be proven right.
    As far as China being a problem nation, didn’t our industrialists trip all over themselves shedding factories as fast as they could move them? Now they’re complaining!

    • Robert says:

      Your post wisely said this, ¨I think the last time we ran a surplus was 1975. So why aren’t we bankrupt? I don’t think Keynes could imagine any country able to export it’s debt as if it was a commodity.¨

      Of course you are logically correct. Indeed, we (the USA) are bankrupt.

      We are logically bankrupt, but not functionally bankrupt.

      The answer to the question is solely this, ¨Military hegemony¨ . I am sorry to report.

      The old saw states this, ¨How did I go bankrupt ? Slowly at first, then suddenly.¨


    • Ed says:

      The ideology of “shareholder value” dictated that managers send jobs overseas. At the same time, large stock grants aligned managerial interest with this ideology. CEO’s could argue, “I have to do it! My duty is to the shareholder so really I have no choice.”

      Lots of people are paid to sing. Sing what the Kings and Queens want to hear and you get paid well. Might be bad for your countrymen, though.

    • lenert says:

      The US can never go bankrupt because it controls the currency.

  5. Drango says:

    China’s trade surpluses didn’t just happen. It requires a great deal of creative financing to maintain a mercantile economy. Just ask Japan. And what do they have to show for it? A few trillion in U.S. Treasuries. When the time comes, those trillions won’t be anywhere near enough to fill the rotting holes at the center of their financial systems.

    • Rates says:

      BUT they do have have FACTORIES, Capital Goods, and manufacturing skills. What does America have?

      We just have debts.

      Just look at Tesla. The reason their cost is so high is because their manufacturing process still relies on people fixing tons of stuff at the end of assembly.

      Ok, ok. So we have delusion as well on top of debts.

      • Brian M says:

        Japan has begun hollowing out as well. Many of the consumer electronics are made in China, and Korea is dominating more and more segments (see cars and appliances). Chinese companies have actually begun buying major Japanese tech giants (Foxconn bought one of the biggies.

        • Rates says:

          I can tell you this. From the point of view of society, Japan is going to come out ahead in the next crisis. Not in terms of wealth, technological superiority, etc, etc, but in the understanding of their shared responsibility that brings the country to where they are and will be.

          As opposed to the entitled people in the West:
          1. If something goes right, it’s all due to me.
          2. If something goes wrong, it’s obviously the government and society (so let’s start shooting people).

          The blood that will be shed in the West will be scary, because recovering from delusion will mean 2) will be acted out in more and more frequency before recognition sets in.

      • lenert says:

        China also has a nice high-speed rail system that reduces demand for passenger aircraft imported from the US.

        We have Afghanistan and Iraq.

    • David Calder says:

      Rates is totally right.. As made up as China’s growth rate might be they do have a huge cash surplus and have sucked up the world’s manufacturing.. The factories are real as are their cash hoards..
      We’re left with a justifiably angry people who used to make a family wage making things. Now we import the spatulas that keep many of us employed..

    • Rates says:

      @Drango, forgot to answer you about Japan. My answer is compared to the US they have EVERYTHING.
      1. Social cohesion that allows them to survive Fukushima without looting.
      2. World class transport system unmatched by anywhere in the world.
      3. A true service oriented culture (with zero tipping).
      4. A super low crime rate.
      5. etc, etc.

      It’s obvious you haven’t been to Japan. It’s far from a perfect society, but here’s one foreigner’s perspective:

      • Brian M says:

        Rates: Don’t get me wrong. I agree Japan has some serious advantages to the clusterf%$# which is these Disunited States. At a minimum, there is a respect for education and skill and knowledge and suspicion toward the poisonous nonsense that permeates American culture.

        Your list makes sense as well.

  6. William Smith says:

    I constantly read many comments on this web site (and others) which show understanding and clarity regarding the broad overview. If so many people can see what is going on, then why is the problem getting worse (as outlined by this article)? It all seems to me like la la land. What will it take to *actually*change* things? Trump is a VERY good first step in my opinion because he is shaking things up, but there is a mighty lot of shakin’ needing to be done. And trade deficits are just one item in a very long list.

    • Paulo says:

      It still goes to the meme of ‘Exceptionalism’ regardless of who is in power right now. Until circumstances shines a light on that myth it will continue to affect any honest evaluation of the trade situation and why it is the way it is. Starting a trade war might feel good, but it won’t erase the last 30 years of offshoring, or the corrupting influence of corporations on US Govt and what Govt continues to allow; even rewards and encourages.

      Time for a do-over and it might take a big crash for impetus. TJ mentioned Germany and the goods it produces. Add to his list, precision machining. German machine works produce the finest machined parts in the world for a variety of applications, including mammoth and finely balanced propellers for the shipping industry. Even the US military buys them. Of course working in the trades is a time-honoured calling in Germany with excellent pay and status.

      “The conventional wisdom in America is that landing a good job requires a degree from a four-year college. But in Germany — where the youth unemployment rate is half that of the U.S. — many students pursue a different path, opting for vocational training programs that set them up for careers directly after graduation.”

      “In recent years, there’s been a greater push for the U.S. to adopt German-style vocational training programs. For example, the Obama administration proposed in Feburary a $200 million investment in skills-based training and apprenticeship programs. However, the difficulty of implementing a system such as Germany’s — combined with the increasing importance of having a four-year college degree in order to secure employment after graduation — has left the future of vocational training in the U.S. uncertain.”

      If a country does not have the people with skills to build a product, it won’t be able to sell it to someone who does. It’s a pretty simple concept. Of course, I’m a biased and proud tradesman and have been for 40 years. My degrees sit in the file cabinet in my wife’s studio….I think. I’d have to go look for them, but why bother? :-)

    • Steve says:

      Great comment. I once posed the question, “In order to change the system, one has to get into a position of power in the current system. But to do that you have to become them. If you have to become them, how do you remind yourself why you got there in the first place.”

      I don’t think its possible to change this train at this point in time. We just need to wait until the inevitable crash. Then pick up the pieces and do better. Leadership with a heaping of humility goes a very long way.

    • economicminor says:

      The Two Party System is entrenched in everyone’s beliefs. People believe it so thoroughly that 3rd party candidates very seldom even get a shot to talk to the general public.. And then people won’t vote for them because they believe that ONLY the Two Parties have a viable chance.. The Two Parties are totally owned and controlled by the people who brought us to this place.. So the existing system can’t change.

      I don’t know what can change this paradigm. But it will change though because trying to prevent the changes needed is like trying to not vent a pressure cooker. We can not continue to suppress wages and expand our military to protect the existing system. The math just doesn’t add up. The huge deficits only make matters worse.

      In looking around the world and back in history I am worried about the kinds of outcomes that happen from the kinds of changes we are facing. They are often not what people want or expect. I’m sure the people of Cuba really didn’t want a dictator when they fought their oppression. I do not believe the people of China really like living under that single party oppressive system either.

  7. TXRancher says:

    Not an economist but found this interesting:

    National Income Accounting

    In practice this is not observed precisely because of data errors
    Production generates Income that are allocated to four main purposes.
    C + I + G + X C + S + T + M
    Production (main areas)
    C Consumer goods and services
    I Capital goods (machinery and equipment)
    G Government activities
    X Exports
    Purposes of Income
    C Consuming
    S Saving
    T Paying taxes
    M Importing

    Consumption C cancels out on both sides so equation reduces to:
    (X-M) (S-I) + (T-G)

    “In words, if there is a deficit on the right-hand side of equation
    (if domestic savings S do not fully finance investments I , taxes T do not fully finance government budgets G or some combination of the two)
    then the balance of international trade X-M must show a similar deficit.”

    • TXRancher says:

      Sorry the equivalence symbol did not translate

      C + I + G + X C + S + T + M

      (X-M) (S-I) + (T-G)

      • lenert says:

        Yeah the equals sign didn’t translate either. The identity and the equation you’re looking for is:

        AD==GDP=C + I + G + NX

        To really blow your mind check out the differences between vertical and horizontal transactions using:

        G – T = S – I – NX

  8. Tom says:

    A revolution through the ballot box is the solution. Never put an encombment back in office.
    One term and gone.Then sit back and see how many cycles it takes to straiten this mess out.
    Show the powers that be that we in this democracy :
    Have the power. Anything less just reinforces the fact that we rely don’t care,but we like to have a reason to complain.

  9. Kiers says:

    good post.

    One point, United Kingdom is absent from the charts (reflecting a Freudian racial bias, perhaps ?)

    • bmiller says:

      Is England a different “race” than Germany?

    • Wolf Richter says:

      The US exported $55.4 billion in goods to the UK and imported $54.3 billion in goods from the UK. So the US had a goods SURPLUS of $1 billion with the UK.

      The charts only list the countries with the largest trade deficits with the US.

  10. Scott says:

    Remember how ten years ago people argued that the trade deficit wasn’t that big of a deal because much of it was oil, meaning that the true deficit was much smaller and therefore manageable?

    • Wolf Richter says:

      Scott, thanks for bringing this up. I just updated my article with this paragraph:

      “The trade deficit in goods alone (without services) was $796 billion. As the trade deficit in petroleum and petroleum products shrank due to surging oil production in the US, the trade deficit in non-petroleum products hit a record of $734 billion.”

  11. gorbachov says:

    Great post Wolfe and great comments.

    If as RATES claim that many if not most companies import at full retail value and not at cost and Wolfe claims the deficit from Ireland is just paperwork ,maybe we don’t have a deficit at all ,and that’s why nothing has been done about it.

    • Prairies says:

      You would have to apply that logic to both the export and import side of the chart and the end result would be the same. You can’t just apply it to imports to make one side look better, I am sure exports are full retail also.

      • Rates says:

        Not necessarily. What high value item does China import from America anyways? Now I am not saying there’s NOTHING China wants from America. But those American things are produced in China like GM cars, Apple electronics, etc. It does not make sense to send those back to American only to be resent back as “export”.

        China does import a ton of American agricultural products (Soybean is I believe America’s largest export to China). But in order to make a dent on those deficits, one option is for American weapon makers to export their stuff. But that sh** does not always work. Let’s be fair, those next generation jets are a failure. There are cheaper and better options somewhere.

        I think what I am questioning is how these export imports are being accounted. Because if those American products produced in China are not counted as imports then there should be a new category to account for those because the Chinese are definitely consuming American products.

  12. mean chicken says:

    “Corporate American plays an outsized role in the trade deficit, and removing incentives to offshore production would be a good first step.”

    Exactly, well explained. What’s wrong with our president, I’m thinking (afraid of) he doesn’t know offshoring is being subsidized, there’s never any mention even in the corporate-owned press.

    And what’s the purpose of expanding military, a revenue sink that’s been bleeding us dry for decades, it’s all absurd.

  13. jay moses says:

    i don’t think the triffin dilemma has been solved as yet, nor will it ever be. if the dollar is to serve as the world’s reserve currency the u.s. must unavoidably run trade deficits. if the u.s. ran a net trade surplus the dollar could not serve as a reserve currency. do the disadvantages of trade deficits really outweigh the advantage of having the dominant reserve currency?

    • Wolf Richter says:

      You said: “if the dollar is to serve as the world’s reserve currency the u.s. must unavoidably run trade deficits.”

      This is false. The euro is the second largest global reserve currency, and the Eurozone has a large trade surplus with the rest of the world. When the DM was still around, it was the second largest reserve currency, and Germany had a large trade surplus with the rest of the world.

      The connection is the other way around: BECAUSE the dollar is the largest reserve currency, the US gets away with large trade deficits.

      • Vinman says:


        I think these trade deficits are are mostly caused by the petrodollar . Because oil is priced in dollars the rest of the world much export as much as they can to the United States to obtain dollars so they can buy there oil .

  14. EMHO says:

    @ TJ Martin
    I tend to agree with TJ.
    I live and work in Germany (I am a german citizen) and though the new Mustang is very popular due to its low price and high horsepower compared to Audi/Porsche etc., it is also understood that qualitatively the Mustang is inferior to German brands and will start breaking down after ~5 years (primarily due to rust and engine issues). American sports cars are considered play and trash cars.
    Case in point my cousin drove a Dodge Journey with a 1.5l Diesel engine for 4 years and after expiration of the warranty a domino effect of faults appeared (rust, electrical, door locks). Before the problems appeared he was a big Dodge/Mopar fan and belonged to various German US car clubs. Needless to say he sold his Dodge for a Skoda Octavia combi, and is happy with his new purchase.
    Also, GM sold Chevy branded Opel vehicles in Europe that directly competed and undercut them on the price so severely that Opel ended being sold to Peugeot. There is still a lot of resentment toward GM due to its actions towards Opel and its employees in Rüsselsheim. None of this will help expand sales of American products in Germany. I know that’s anecdotal and will not convince those with a contrarian view.
    Finally, the stated or implied threat of a trade war with China, EU and Japan will only cause them to align themselves against the US. Lets also not forget that US corporate interests are at stake here too! Will they simply accept a change to the current status quo, or will they fight to keep the financial/regulatory benefits they now possess?
    P.S. I am an mechatronics technician working in aerospace in the Frankfurt/M. Region.

    • Wolf Richter says:

      Friend of mine had an Audi TT. Total piece of crap. Couldn’t keep it out of the shop. Got rid of it after two years. Does that make all Audis crap? Of course not. Anecdotal evidence is to be enjoyed with a grain of salt. But I’ll never buy an Audi based on what he has been through.

      • Frederick says:

        Give me a Porsche over a Ford Mustang any day NO comparison How can you actually write that the Mustang is the most popular sports car in Germany? What’s in the water out there in the land of fruits and nuts Wolf

        • Wolf Richter says:

          Look at the price difference. A Mustang is a mass-market car. A Porsche is for the elite. Price matters to many people, but not to all. It’s as simple as that. Maybe you’re among those who can pay $120,000+ for a car, but many people cannot. So if an automaker wants to sell a lot of cars, they have to bring the price down to where people can afford it.

        • d says:

          “Look at the price difference. A Mustang is a mass-market car. A Porsche is for the elite.”

          Look at the Major factor in this.

          Unless you are and Advanced Driver. The Pony car, will forgive you your driving errors, and the Porsche wont.

          Even in Germany. Bent Porches, are very expensive to fix.

        • Dan Romig says:


          The newer Porsche 911s do have rear engines, but the trailing throttle oversteer, or lift-off oversteer, of the old air cooled 911s is much less. The older semi-arm-trailing rear suspension did cause a snap oversteer that caught many an unskilled driver unprepared.

          I would bet that almost all Germans who drive a 911 are aware of this potential hazard. In a Mustang, if you’re too hot in a curve, lifting off the throttle shifts force to the front tires and helps correct a slide. In a Porsche, just keep the throttle steady and turn the steering wheel further to make a correction.

          The one major advantage that a mid or rear engine car has over a Mustang is deceleration, and if you’re cruising along at 250 kph, slowing down can come in handy!

        • d says:

          Maybe I am not the only person here who understands and agres with everything you wrote.

          “The one major advantage that a mid or rear engine car has over a Mustang is deceleration, and if you’re cruising along at 250 kph, slowing down can come in handy!”

          Very handy on the Autobahns in snow and heavy rain where they still drive at that speed +, with a less than 20 Meters following distance.

          And they still do I have experienced it.

          The thing I like about Porsche, much like early RX 7’S they love to be driven. In a Porsche if you know what you are doing, you can use every one of those available horse power, in most gears.

          And NO I do NOT like the flappy paddle equipped ones. Dont down shit hard enough for my liking, as I prefer proper gear to foot breaking. Where the style of clutch release can be used to induce over-steer.

      • EMHO says:

        Like I stated above, the first 3/4 of my comment was anecdotal, but what do you think the consequences of a trade war would be for US/EU relations. How would Japan react, or more importantly China?
        China certainly would not roll over to please “America First” sentiments of Trump and his followers, there certainly could be many forms of retaliations possible. I know from back in early 2017 that Federal Government of Germany was investigating how to proceed against the US government via WTO court. Here are a few links in german and English (sorry, I do research mostly in german):

        Here are a few more links from the English language site of Der Spiegel, Germany’s preeminent weekly:

        I just did a quick search about EU plans to counter Trump trade policy:

        So, my question still stands: Is a trade war worthwhile with close political allies? Or should the USA engage in more productive enterprises like increased spending on basic and advanced research, infrastructure improvement, educational reform and vocational training?
        During my apprenticeship program in the late 90s and early 2000s german industry was openly discussing moving factories and core technical/research competencies overseas, in particular Eastern Europe and China for cost reductions and competitive advantages. Then chancellor Schröders’ government made it clear that doing so would cause the loss of tax/legal protections and political backing for industry. Industry backed down. How is that for industrial policy? Could you imagine President Trump or Republicans/Democrats doing so? What would happen if they tried this?
        I belief this would be a more beneficial approach then this high risk/low reward scenario proposed through MAGA.

        As an aside, I mentioned in my first comment the Dodge Journey, it is now sold in Europe as the Fiat Freemont, and the Dodge Grand Caravan is sold as the Lancia Voyager. The Freemont is made in Mexico, the Lancia is built in Canada.
        Back in the mid 90s my aunt drove a Jeep Grand Cherokee through town, it was made in Austria! She loved it, except for the fuel economy.

      • Dan Romig says:

        The Audi TT is built on the VW PQ34 platform. It’s basically a Golf made in Audi’s Hungarian subsidiary based in Gyor, Hungary.

        Audi’s Quattro system is effective, and there’s a lot of them that thrive here in Minnesota’s winters, but they have a high-mounted engine that sits far up in the front. The new Q5 does have a longitudinal engine layout though ….

  15. The Lost says:

    “2017 was a banner year for the US trade deficit, according to the Commerce Department’s report today.”

    Which means that all this nonsense about ‘inflation fears’ will never come to pass. America will never have meaningful inflation when all its production is out-sourced and American workers are competing with billions of starving people who will work for nickels.

    The market drops seems to have been orchestrated (mr 50 cent?) rather than a realistic portrayal of legitimate inflation fears- wage or otherwise.

    Dow 30,000. here we come!

  16. Derek says:

    News in March 2017: Former BEA Director
    Steve Landefeld argues that including reexports as imports without the same offset to exports would create misleading
    statistics by increasing the merchandise trade deficit.

  17. Gandalf says:

    It’s important to interject here that your numbers for the NAFTA nations show once again that the purpose of Free Trade agreements for the U.S. is to actually OPEN UP the market for U.S. exports to other nations. Otherwise, most countries have tight restrictions and high tariffs on the import of U.S. goods. We have a huge trade imbalance with China, Japan, and the European Union because we do NOT have free trade agreements with them. Or, rather, we freely import stuff from them with little or no tariffs while they restrict our exports.
    As much as Trump complains about Mexico taking jobs away from Americans, the truth is that NAFTA opened up the markets in Mexico to American goods to such an extent that most of the gasoline in Mexico (70% now) comes from the U.S. Most of Mexico’s corn and poultry and many other farmed goods come from the U.S. also, as U.S. industrial farming was already far more efficient than Mexico’s small scale farms. The upshot? Nobody on either side of the border has jobs! On the American side, human farmworkers are replaced by machines and industrial size farming technology, on the Mexican side, the small farmers are displaced by the low cost U.S. products. So they go North to find jobs as illegal immigrants, or go work in the maquiladoras, or work the drug trade.

  18. LouisDeLaSmart says:

    The numbers are a reason for concern, but they are not a result of a simple trade negotiation but a rather complex problem. The numbers tell a story of failed internal policies.
    EU and Japan are protecting markets, not through discrimination (ok, probably sometimes they do something crappy), but through technology standards. This practice has shown successful in rewarding investors who pursue tech development, while helping the environment and protecting domestic markets. Sometimes these policies are of course abused in the favor of the EU member states. And sometimes EU companies cheat (VW emission standards anyone?). Have in mind this is a policy how to stay on top, not how to get there.
    EU has a significantly lower net salary, and a fairly functioning public (!) healthcare system. The real estate price is nowhere close to the US madness. A dollar in Germany has much more value then in the USA (i might be wrong here, not entirely sure).
    The vocational and educational system in EU is intended to give opportunities to smart and capable young people, regardless of financial standing. Since you are not the customer but you are instead provided a service you should otherwise pay for, the standards are much higher. Policies like “no moro…ahm…customer left behind” are not applicable . This also guarantees class mobility without “debt serfdom”. Unlike the US where you have elitism the likes of which have not been seen since the feudal times.
    Also large number of fairly well educated legally employed workers from new EU member and EU aspiring states migrate to the “old country” in pursuit of greener pastures. Hence there is no shortage of labor, keeping the cost down.
    My point being, before fixing healthcare and education, any gain made by trade deals will be of short breath.

  19. ambrose says:

    Isn’t a trade deficit the natural outcome of a system whereby the US prints unlimited, unbacked dollars to purchase the world’s production and the producing countries the hold the “reserve currency” as their national wealth? How else could the trade balance work given the system in place and the public shunning of gold as money?

    • martin says:

      You report that America’s “Goods deficit with China hit record $375.2 billion” (“U.S. Trade Deficit Grew to $566 Billion in 2017, Its Widest Mark in Nine Years,” Feb. 6). Unfortunately, this report is inadvertently misleading – and misleading in a way that fuels destructive protectionist sentiment.
      First, in our world of nearly 200 countries, one country’s trade deficit with another country is as meaningless as is one individual’s trade deficit with another individual. For the same reason that absolutely no relevant information about my economic health is conveyed by knowledge of the fact that I have a large trade deficit with my plumber (who is one of many people with whom I economically interact), absolutely no relevant information about America’s economic health is conveyed by knowledge of the fact that America has a large trade deficit with China (which is one of many countries with which Americans economically interact).
      Second, because only 20 percent of the U.S. economy is goods-based while at least half of China’s economy is goods-based, it’s unsurprising that we Americans buy more goods from the Chinese than than they buy from us. (Equally unsurprising, by the way, is the reality that the Chinese buy more services from us than we buy from them.) More fundamentally, because services are every bit as economically relevant as are goods, reporting on the U.S. “goods deficit with China” (or with the world, for that matter) makes no more sense than does reporting on, say, the U.S. “things-that-are blue deficit” with China. The dollar value of blue things that we Americans buy from the Chinese might well be greater than is the dollar value of blue things that the Chinese buy from us, but this factoid is obviously of zero relevance. Equally irrelevant – and for the same reason – is the factoid that the dollar value of goods that we buy from the Chinese is greater than is the dollar value of goods that the Chinese buy from us.
      Donald J. Boudreaux
      Professor of Economics
      Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
      George Mason University
      Fairfax, VA 22030

      Since you evidently censored my comment on your mercantilism,I forward this. Martin

      • Wolf Richter says:

        This is hilarious. Made my day. You self-identify to belong to the exact same group that I pointed out in the article, the “endless series of economists” who say that this trade deficit doesn’t matter, that offshoring is good for the economy, etc. etc. Here is the quote:

        “Then, as the overall US trade deficit ballooned, it was deemed no big deal because soaring imports showed that the US economy was healthy, driven by consumer demand, according to an endless series of economists and politicians.”

        When are they going to offshore your job? Maybe never, you hope. So it doesn’t hurt you. But Americans whose jobs have gotten off-shored, and who now have a minimum-wage service job, have a different take on this.

      • economicminor says:

        AND again, the US is continually increasing military spending to keep the *world* safe and that is not paid for by any of our competitor countries.. just the US taxpayer who is forever losing ground economically… you want a one world while the US taxpayer supports the majority of the costs to underwrite it? The middle class in the USA is shrinking and you think this is OK? Because you owe your plumber?

        And there is a difference between trade and fair trade.. We do not have fair trade. Nothing is free!

      • MD says:

        “…only 20 percent of the U.S. economy is goods-based while at least half of China’s economy is goods-based…”

        YUP there it is – the difference being the REAL wealth creation of manufacturing and export, as opposed to the fake prosperity based on credit-fuelled consumption (of coffee and food mostly).

        And yet it’s truly amazing how many economists don’t want to recognize the fact that China is a powerhouse whilst the USA…well, the USA is a degenerate place that has Donald Trump.

        There’s no such thing as a prosperous ‘post-industrial’ (ie non-industrial) country. As the USA is about to find out.

    • lenert says:

      Approaching my 5% limit:

      “… it’s not inherently a problem for a country to have a trade deficit. For example, a fast-growing economy pulls in more imports as it expands, which pushes a country’s international trade account toward deficit. In that context a trade deficit is good for the economy, allowing the country to consume and invest more than if it maintained balanced trade. This was the story in 2000 when, after four years of strong growth, the American economy had an unemployment rate of 4 percent and a trade deficit that amounted to 3.7 percent of GDP.

      But that story ended after the recession in 2001. The economy didn’t get back the jobs it lost in 2001 until January of 2005—then the slowest employment recovery since the Great Depression (it’s since been outdone in slowness by the recovery following the Great Recession). The trade deficit during this period continued to rise—the dollar was then over-valued, making U.S. goods less competitive internationally—eventually peaking at almost 6 percent of GDP in 2005 and 2006. In the early aughts, then, the growing deficit was not associated with a strong economy but a weak one.

      a trade deficit can have a role in producing financial-market bubbles and the devastation that’s caused when those bubbles burst. The problem arises when other countries suppress spending and investment, thereby boosting their savings rates and their trade surpluses. By the rules of basic accounting, those surpluses have to flow somewhere, and many flow into America. This further strengthens the demand for and value of the dollar, making American exports less competitive—and thus exacerbating the trade deficit. In the 2000s, these trade patterns helped provide the cheap capital that, in tandem with inattentive regulators, inflated the housing bubble. Almost a decade later, the country is still recovering.”

      Baker and Bernstein –

  20. JS says:

    I don’t believe Canada has balanced trade with the US.

    Stuff that is made in China or Mexico and is shipped to the US for packaging / distribution is labelled as being of US origin for trade statistics. It is not considered to have originated in China or Mexico. Same thing for auto parts that undergo intermediate assembly in the US and are transshipped to Canada.

    It is Canada’s interest to label them as US imports to maintain the lie.

    I’ll know when trade is balanced. When homes in Mississauga and Hamilton sell for a dollar, as they do in Buffalo, Cleveland and Detroit.

    Nafta and MFN deserve to be shredded.

  21. Jdx15 says:

    The irony is that most of the Trump supporters probably don’t know that the new tax cuts incentivize American firms to move production offshore. The US has now adopted a territorial tax system. In addition to paying a lower corporate tax rate in Hong Kong or Singapore, companies are allowed to deduct a 10 percent return on their foreign investment in factories before a new minimum tax is applied. That means a US manufacturer would want their factories anywhere but the US.

  22. Nicko2 says:

    The only way to survive the post-global world is to retrain and learn new skills…..or relocate to where the jobs are (be it to another state or even another country). Low skilled manufacturing jobs are never coming back.

    • Brian M says:

      What a useful recommendation. Abandon your community and all of its history and networks in pursuit of mythical jobs (for which you may not be trained or have any aptitude for) and move to an overpriced coastal metro where studio apartments in a drug zone are $2500 per month.

      Maybe the unemployed should just wish for a magical flying pony?

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