I’ll have a lot more to say about this later, but I don’t understand this figure from the front page of my WSJ this AM.
The idea, which has some merit but is easily abused, is that the Trump admin wants to refine the way we measure trade flows–imports and exports–by accounting for re-exports, goods made elsewhere that pass through our country en route to somewhere else.
There’s a cogent argument that these goods should not be treated as exports, since they were not made here, and thus did not involve the economic activity of regular exports (other than some port/warehousing activities, I guess).
But here’s the thing, and the reason I find the figure above confusing, though I may well be missing something and will read up on this ASAP: if you’re going to disregard the exports, then you must also disregard the imports. That is, when a good is re-exported, I see a rationale for subtracting its value from US exports. But, as a statistician emphasizes in the article, that same value must also be subtracted from US imports.
That won’t change the overall trade balance, but it will change our bilateral balances with our individual trading partners. From what I’ve seen, for example, our trade balance with Mexico will worsen, but our trade balance with some Asian countries might improve (implying imports from Asia that pass through the US on their way to Mexico).
So, a) I don’t get why the WSJ figure appears to show a larger overall trade deficit, and b) you just have to be really nervous when team Trump starts fooling around with this sort of thing.
More to come…