On Tuesday the latest US trade statistics for January came out. They showed the US deficit at highest for nearly five years, at $48.5 billion. In the 2000s there was some fretting about the continuous high deficits the US ran, but in official policy circles the main view was that a trade deficit was at most a symptom of problems rather than a problem itself.
The Trump administration takes quite a different view. Peter Navarro, Trump’s new Director of the National Trade Council, said on Monday the reducing the US deficit would be its top policy focus. A few months previously, Navarro and his associate Wilbur Ross published a document entitled “Scoring the Trump Economic Plan”, which included what they termed the “Trump Trade Doctrine” namely: “any deal must increase the GDP growth rate, decrease the trade deficit, and strengthen the US manufacturing base”.
In the UK a lot of attention has focused on the second part of the Trump Trade Doctrine, “decrease the trade deficit”, because on UK official statistics, every year the US runs a rather large trade deficit with the UK — some £39 billion in 2015, up from £19 billion in 2005. This has led a number of UK journalists to be rather sceptical of the idea the US will accept a trade deal with the UK.
Thus, for example, on Tuesday Robert Peston tweeted: “So to remind you the US has a big deficit on trade with UK. So what chance our famous future trade deal is good for us - or them?” A few weeks ago, Ben Chu wrote an article headlined “Brexiteers – read the 'Trump Trade Doctrine' and weep”.
So to remind you the US has a big deficit on trade with UK. So what chance our famous future trade deal is good for us - or them? pic.twitter.com/D3oS4VWPIx— Robert Peston (@Peston) March 7, 2017
A point that escaped almost everyone’s attention, however, is that although UK statistics say the US runs a deficit with the UK, on the official US data the US runs a surplus with us and has done every year since 2006! So, for example, in 2014 the US thinks it ran a $13 billion surplus with us, whilst the UK thinks it ran a £31 billion deficit.
Yup. That’s right. You aren’t misunderstanding. There isn’t any clever catch here. If we are running a surplus with them, they must be running a deficit with us and vice versa. Both sets of official statistics can’t be right. The thing is, no-one seems to know which (if either) is correct. The problem seems to arise mainly in the services trade. The IMF even commissioned a special investigation into the anomaly some years ago. But there remains no consensus.
I’m going to stick my neck out here and suggest that the Trump administration is likely to trust good ol’ American-made data over nasty imported foreign data. So (at least as long as it is politically convenient for them to do so) they are going to believe that the US runs a surplus with the UK so there is no need for any US-UK trade deal to reduce UK imports. And if UK financial journalists really have the UK’s interests at heart, they might try quoting US official trade statistics every now and again.