The Census Department reports two new records trade deficits in January.
For those who appreciate record-breaking efforts, I am pleased to report the International Trade in Goods and Services report for January has many new records to consider.
Trade Details
- January exports were $269.8 billion, $3.3 billion more than December exports. January imports were $401.2 billion, $36.6 billion more than December imports.
- The January increase in the goods and services deficit reflected an increase in the goods deficit of $33.5 billion to $156.8 billion and an increase in the services surplus of $0.2 billion to $25.4 billion. The goods deficit and the goods and services deficit are two new records.
- Year-over-year, the goods and services deficit increased $64.5 billion, or 96.5 percent, from January 2024. This is a new record too.
- Exports increased $10.6 billion or 4.1 percent. Imports increased $75.2 billion or 23.1 percent.
Real Goods in 2017 Dollars – Census Basis
- The real goods deficit increased $30.8 billion, or 27.5 percent, to $142.9 billion in January, compared to a 27.4 percent increase in the nominal deficit. This is a new record.
- Real exports of goods increased $0.6 billion, or 0.4 percent, to $142.3 billion, compared to a 1.6 percent increase in nominal exports.
- Real imports of goods increased $31.4 billion, or 12.4 percent, to $285.2 billion, compared to a 12.5 percent increase in nominal imports.
In retrospect, I am not sure how many new records we set in January.
Some of you might be wondering where, if anywhere we are winning. In Trump parlance, winning means trade surplus.
Goods by Select Countries and Areas Surpluses
- Netherlands +$4.3 Billion
- South and Central America + $4.3 Billion
- Belgium +$0.6 Billion
- Brazil +$0.6 Billion
What about losing? In Trump parlance, losing means trade deficits.
Goods by Select Countries and Areas Deficits
- China ($29.7), European Union ($25.5), Switzerland ($22.8), Mexico ($15.5), Ireland ($12.4), Vietnam ($11.9),
Canada ($11.3), Germany ($7.6), Taiwan ($7.5), Japan ($7.4), South Korea ($5.4), India ($4.2), Italy ($3.5),
Malaysia ($2.5), Australia ($2.0), Hong Kong ($1.4), France ($1.0), Singapore ($1.0), Israel ($0.6), United
Kingdom ($0.5), and Saudi Arabia ($0.1).
Notable Changes
- The deficit with Switzerland increased $9.8 billion to $22.8 billion in January. Exports increased $0.6 billion to $1.8 billion and imports increased $10.3 billion to $24.6 billion.
- The deficit with Ireland increased $6.2 billion to $12.4 billion in January. Exports increased less than $0.1 billion to $1.2 billion and imports increased $6.2 billion to $13.6 billion.
- The deficit with India increased $3.4 billion to $13.2 billion in the fourth quarter. Exports decreased $0.2 billion to $20.6 billion and imports increased $3.2 billion to $33.8 billion.
- The deficit with the European Union decreased $5.8 billion to $38.5 billion in the fourth quarter. Exports decreased $0.9 billion to $164.8 billion and imports decreased $6.7 billion to $203.3 billion.
What’s Going On?
- The new records are all related to front-running imports to avoid tariffs.
- Switzerland is related to front-running gold to avoid tariffs.
- Ireland is related to front-running pharmaceuticals to avoid tariffs.
What About Gold?
Brad Setser commented “About half of the $67 billion increase in imports from last January is from “finished metal shapes” (probably gold bars) and non monetary gold. Imports from Switzerland also soared.”
January 2024 year-to-date on finished metal shapes was 3,030. In 2025 it’s 31,200. I believe that will be considered monetary gold by the BEA when it comes to calculating GDP.
BEA Adjustments for Gold
Gold is used for two purposes: for industrial demand (as an input into the production of goods and services, such as jewelry, watches, and electronic equipment) and for investment (as a store of wealth and a hedge against inflation). In the NIPAs, all domestic production of gold, regardless of its final use, is included in GDP. However, the NIPAs do not treat transactions in valuables, such as gold, as investments in fixed assets, and so investments in gold (other than gold held in industrial inventories) are not reflected in gross domestic purchases (PCE, gross private domestic investment, and government consumption expenditures and gross investment).
For example, if households purchase gold as a form of investment, including that purchase in PCE would distort the analysis of consumption and saving. In contrast, in the international guidelines presented in the System of Accounts 2008 (SNA), the capital account includes the net acquisition of gold and similar valuables (such as antiques and other art objects) that are held as stores of value in gross fixed capital formation as “Acquisitions less disposals of valuables.”
Only a small share of the international transactions in nonmonetary gold recorded in the ITAs is for business or industrial use; most transactions are for investment or other purposes. Consequently, the NIPA estimates for exports and imports of nonmonetary gold are not based on the ITA estimates. Instead, the NIPAs incorporate a special adjustment for transactions in gold.
The above is from BEA Net Exports of Goods and Services.
How Did Gold Imports Exacerbate the Huge Decline in GDPNow Nowcast?
On March 5, I asked How Did Gold Imports Exacerbate the Huge Decline in GDPNow Nowcast?
Pat Higgins, creator of GDPNow commented:
The GDPNow model doesn’t adjust for gold imports/exports. In the GDP accounts, the BEA does make adjustments for gold as described on pages 8-13 and 8-14 of BEA Net Exports [above link] when the translate the Census data on imports/exports the GDP based measures.
I believe the safest thing for now is to factor out trade data from GDPNow.
Net trade accounts for about -3.0 PP of the decline in GDPNow starting February 28.
On March 5, I arrived commented “If we factor out imports by adding 3.0 PP to the GDPModel model, we arrive at a Mish-adjusted base forecast of +0.20 percent and Real Final Sales of -0.20.“
That is one hell of a plunge even factoring out trade data completely.
I will update my calculations soon. There is a slight improvement today.
Meanwhile, the economy mostly continues to weaken, especially jobs. ISM services improved.
Related Posts
March 6: Continued Unemployment Claims Jump by 42,000 Expect Worsening Conditions
Initial claims fell but continued claims rose. Due to DOGE, both will soon surge.
March 6: ISM Services Stronger than Expected with Hot Prices
The price component of ISM services was over 60 for the third month.
March 6: ADP Private Employment Up a Weaker than Expected 77,000
The Bloomberg consensus was 162,000 so this was a very weak report.
Mish Take For Now
- The slowdown in jobs will matter more than price hikes due to tariffs. Bond yields at the long end will decline modestly.
- My alternate second take is lingering stagflation lite.
- I rule out door number 3, a soft landing. Indeed, we may have a very hard landing due to tariff madness.
- The “No Landing” (up, up, and away) door number 4 scenario that worked for a long time is now dead.
Base Case: A Global Trade War Has Started – Global Recession Will Follow