The trade deficit grew in January as imports of products and services outpaced American exports, according to the U.S. Commerce Department. That’s not really all that surprising, given that the U.S. relies on other countries for much of the stuff we buy — that’s how globalization works.
But it’s worth pointing out that exports went up too. In fact, exports of consumer goods and vehicles hit records in January, and that’s after accounting for inflation.
A rise in exports is a sign that consumer demand in other countries is strong. Just look at vehicle exports, said Kadee Russ, an economics professor at the University of California, Davis.
“They’re up in Asia compared to a year ago, they’re up in Europe and South and Central America compared to a year ago. So this is really a global phenomenon,” she said.
Other countries are recovering from the pandemic, Russ said. “So we’ve recently seen the European Union raise its growth forecast for 2023 in the eurozone. The IMF [International Monetary Fund] raised its 2023 projection for Japan’s growth this year.”
An uptick in U.S. exports is a little surprising. For one, the strong dollar has been making U.S. exports more expensive overseas. And U.S. trade policy has actually been discouraging many exports, said Rachel Brewster, an economic law professor at Duke University.
“Unilaterally, we’ve imposed a lot of export restrictions on sensitive goods, such as semiconductors,” she said. “And the negotiations that we have been doing are largely with Japan and the Netherlands on reaching a multilateral agreement to shut off more trade with China on the export side, rather than liberalizing.”
Some of the increase in exports might not reflect growing economies.
Pharmaceutical exports were up by a lot in January, said Christine McDaniel, senior research fellow at at George Mason University’s Mercatus Center.
The thing is, “a lot of trade in the pharmaceutical sector is intraindustry trade,” she said. “That is, large multinational corporations shipping to and from each other.”
But McDaniel said there is underlying strength in the export sector. Other types of consumer goods are selling fairly well too: “Cellphones, jewelry, stereo equipment, appliances, sports apparel, etc.,” she said.
Any increase in exports is welcome news for U.S. factories, said Chad Moutray with the National Association of Manufacturers.
“We want a growing global economy, right? We want to be able to sell more of our products — that helps lift overall incomes in the U.S.,” he said.
And as the global economy keeps improving, Moutray said U.S. exports could keep growing in the long term.