By Peter Coy at BloombergBusinessweek
The good news? The overall U.S. trade deficit unexpectedly shrank a bit less than 1 percent in July from June. It was the smallest gap in half a year, and exports broke a record. The bad news? The U.S. deficit in manufacturing set a monthly record, and the deficit in goods traded with China also broke a record.
Alan Tonelson, a trade analyst who blogs at RealityChek, dwelt on the negative in an interview today. “There’s no doubt that major barriers to U.S. exports remain,” he said. “China is case in point No. 1. It’s still one of the most protectionist economies in the world.”
Boston Consulting Group has argued in a series of reports that the U.S. has a bright future in manufacturing because the high productivity of American workers makes it an affordable location for production, while China is slowly pricing itself out of the market through rising labor costs. It calls the U.S. a “rising global star.”
As reported by the Bureau of Economic Analysis, the overall U.S. trade deficit in both goods and services was $40.5 billion in July—down from June, but up $1.1 billion from a year earlier. The July deficit with China in goods was $30.9 billion, vs. a previous high of $30.6 billion. The overall manufacturing deficit, at $67 billion in July, is running 11 percent ahead of last year’s record pace, Tonelson calculates.