A shift back to home: US exports are up
Tuesday, July 18, 2017
In addition to the raw materials that comprise the manufacturing process — plastic, metal, wood, and so on — there's an invisible ingredient that can be found on every assembly line if you know where to look: politics.
From the restrictions that artificially drive up scarcity for some components to the freedoms that make others easily available, the decisions of the U.S. government have an outsized impact on manufacturing as a whole. Recent trade metrics highlight a move toward self-reliance, albeit at a pace that some would say rivals a particularly patriotic glacier.
All in all, the trade gap is narrowing, and that's good news for U.S.-based manufacturers.
A smarter choice
It's no surprise that U.S. manufacturing is trending toward near-shoring under President Donald Trump, who has never been shy about taking on the politically-charged concept of self-reliance — read as domestic production — for the manufacturing industry.
The turmoil over healthcare bills continues to distract from progress that could be made on delivering some of the heavy-handed adjustments alluded to at the start of his administration. For some, the added delay is a chance to rake in what they can from unbalanced trade before the hammer comes down, but others have made the arguably wiser choice to get ahead of the game and shift their efforts stateside in anticipation of future political regulation.
The added focus on export increase that comes with those efforts is starting to show. Per Bloomberg, U.S. exports are at a two-year high and looking to climb.
A few exceptions
This promising movement doesn't extend to the country's trade balance with two of its most well-known love/hate relationships: Mexico and China. While overall U.S. exports are up, the trade gap with these two countries actually widened in the same period of time, with Mexico at a troubling 10-year high of $7.3 billion.
This is likely why these two countries bear the brunt of Trump's fiery political targeting, and why he's so eager to wean the U.S. off of an influx of imports — the numbers show just how entrenched the trade gap really is in the domestic economy. On the other side of the spectrum, however, U.S. exports to South Korea were at a historical peak in May amid the saber-rattling of North Korea's leader Kim Jong Un, an outspoken foe that the U.S., South Korea, and several ally nations share in common.
A metal crossroads
As car sales continue to fall, the decreased demand for imported automobiles stateside is reflected in the recent import percentage drop of 0.1 percent. While this alone might spur minimal growth in the domestic auto industry, Trump's recent remarks on steel are poised to play more of a factor.
In a July meeting with Canadian Prime Minister Justin Trudeau, Trump indicated he would be stopping what he referred to as "steel dumping" from Canada, cooling trade flow of the important metal into the U.S. by "maybe" imposing both tariffs and quotas. Currently, Canada is the largest exporter of steel to the United States, providing 17 percent of the overall incoming volume.
Any tariffs or quotas could also potentially impact aluminum exports to the U.S., which would leave some parts of the domestic automotive industry scrambling for stateside producers of those important raw materials.
One thing is certain: Politics have been and will continue to be the driving force behind major import/export decisions, leaving many individuals in the supply, demand and logistics chains nervously watching the news to see which executive promises are bluster, which are destined for implementation, and how much those decisions will impact the growing trend of domestic sourcing.
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