Could a Permanent US Trade Surplus be in the Offing?

While economic observers’ attention has been increasingly riveted on the seemingly uncontrollable annual national trillion dollar plus deficit and the $16 trillion plus Treasury debt, little note has been given to the shrinking “current account deficit.” This unfamiliar term encompasses the quarter-annual imbalance caused by the negative impact of all goods and services imported versus those exported— unlike the monthly trade deficit, which is a more narrow measure not including currency exchanges.

Prior to the outbreak of the 2008-10 Great Recession, the monthly trade deficit was averaging $75 billion a month, with a growth momentum indicating an annual $1 trillion deficit in the upcoming few years. With 20% of this amount tied up in energy imports from the OPEC nations and the imbalance of trade with China out of whack and growing worse, it was only a question of how fast and how prodigious this growth could become in the current decade. But in the wake of the worst global financial debacle since the 1930′s Depression, the monthly trade deficit has been in a state of reversal, with a 50% shrinkage of the quarter-annual current account deficit in sight. Projecting this trend to 2020, a trade surplus, not seen since the early 1950′s is a distinct possibility for the following reasons:

1) Energy. Due to a combination of a 10% decrease in national demand and a massive surge in crude oil and natural gas production, this largest of all overseas trade deficit components has almost been cut in half. The additional benefits of energy imports from NAFTA partners Canada and Mexico make OPEC dependence increasingly less voluminous.

2) The China factor. Although imports from China, which include goods flowing from relocated U.S. plants have not substantially lessened, Beijing’s greater focus on internal development has decreased their lopsided export/import margin significantly. U.S. transportation equipment, such as planes and cars, plus heavy construction and agricultural machinery, and consumer goods are making an increasing dent in the near 10 to 1 import/export ratio that once existed.

3) Insourcing. As once outgoing displacement of U.S. manufacturing facilities have begun to trickle back to the homeland, many manufactured goods are appearing from revamped American sites. With wages, transportation, and industry cost levels shrinking in America’s favor, this is certain to remain a continuing trend.

4) Foreign currency influx. While once limited to the purchase of U.S. Treasury debt or the stock market for the past decade, multi-trillion dollar foreign surpluses are now focused on purchases of American fixed assets, such as residential and commercial buildings. This trend is only beginning, and is indicating future flood tide proportions on a broad range of assets.

5) Services. Whether it’s tourism, entertainment, general consultancy, legal services, or advertising/public relations, the U.S. is still the most sought after for these “non-industrial/agricultural money makers.” Despite disputes regarding U.S. intellectual property rights, there is no seeming slowdown in this growth.

When looking ahead to the end of this decade, these factors make it a better than an even bet that the U.S. will be in the realm of a solid surplus by 2020.

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