The one-way street of Globalization at Corporate America.
By Wolf Richter for WOLFSTRAAT.
It was therefore inevitable after the US stimulus efforts: the US trade deficit in goods – exports minus imports of goods – reached a record $ 84.8 billion in November, according to the previous record set in August, according to the forecast of US International Trade in goods by the Department of Commerce. This forecast is likely to be adjusted in some way with the fuller amount of trading data early next year.
During the financial crisis, the trade deficit narrowed drastically as imports fell as U.S. consumers cut back on the purchase of goods, imported goods, although they still buy services, which are mostly not imported. Now the opposite is happening: consumers have bought record quantities of durable goods, but have cut back on spending on services. And many of these merchandise they bought were imported:
This is one of the peculiar consequences of the US efforts to stimulate the economy with government distributions to consumers and companies, with Fed handouts to the financial markets and with the Fed’s interest rate suppression. Trillions of dollars have flown by so fast that it’s hard to see.
These effects have been exacerbated by the shift from the pandemic of buying services, such as flights, accommodation and gym memberships, to goods such as a whirlpool tub for the deck to vacation at home, laptops to teach at home and bicycle trainers to exercise at home. .
One of these consequences is that the US has stimulated the manufacturing economy in China, Germany, Japan, Mexico and other countries where these goods are manufactured. But in turn, they are not buying enough American goods for enough reasons, including the fact that the US no longer produces much of the goods because America has globalized its supply chains and offshore production in America.
Imports of goods rose to $ 212 billion in November, according to the Department of Commerce’s forecast today. That was not yet the record set in October 2018 ($ 219 billion).
Exports of goods rose to $ 127 billion, but remain below the 2018 levels that were only a fraction of imports at the time. And the gap between imports and exports – the trade deficit in goods – has widened over the years:
The value of imports is negative in the GDP calculations. The value of export is positive in the GDP calculations – hence the colors in the graph above, green or export and red for import.
The US consumer economy is driven by the relentless globalization of Corporate America and the pursuit of manufacturing the last piece of goods in other countries, especially cheap countries. The US tax system also encourages them to do so.
In terms of dealers, Walmart was one of the great pioneers decades ago. But now they are all doing it. E-commerce makes it easier. Amazon perfected it; On its platform, Americans can buy directly from Chinese and Indian manufacturers.
Corporate America sells a lot of goods in other countries. For example, all US automakers are big in China. GM and its joint ventures are the largest automaker in China. But these vehicles are manufactured in China, and now some of them are imported into the US.
Tesla does the same; it raised $ 1.6 billion in funding from government agencies in China to set up the manufacturing plant and a design center in China. The Model 3s selling it in China, and soon the Model Y will also be manufactured in China. He is now doing the same in Germany for his sales in Europe.
Most of Apple’s revenue comes from markets outside the US, and most of its products sold there are manufactured abroad.
U.S. consumer goods companies, automakers, and many other manufacturers have largely abandoned and exported their products in the United States. Globalization has become a one-way street.
U.S. companies are power stations overseas, but they have increasingly shifted U.S. production to other countries. This is why even a boom in U.S. brands sold overseas does not increase U.S. exports and manufacturing. But a surge in U.S. sales of goods, such as the newly-funded boom, is boosting U.S. imports. Thanks to that one-way street of globalization.
Consumers earned more in November than in the Good Times, but much less than back then when free Pandemic money came down en masse. Read … Majestic surplus of stimulation money ended. Confronted with Second Wave, Americans cut back, even on durable goods
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