Economy

Consumer Spending And Exports Collapse

JM Ashby
Written by JM Ashby

It's not necessarily a surprise that consumer spending and international trade collapsed as most of the world went into lockdown because of the coronavirus pandemic but, with that said, these hisotrically-bad numbers may tell us why Trump has decided to recenter China as his favorite boogeyman.

Consumer spending dropped by the largest amount on record dating back to at least 1959 last month according to the Commerce Department; more than economists predicted.

The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, plunged 13.6% last month, the biggest drop since the government started tracking the series in 1959. It eclipsed the previous all-time decrease of 6.9% in March.

Economists polled by Reuters had forecast consumer spending would plummet 12.6% in April. Spending was depressed by a decrease in outlays on healthcare as dental offices closed and hospitals postponed elective surgeries and non-emergency visits to focus on patients suffering from COVID-19.

Meanwhile, exports and imports both declined by a large amount with the former far outpacing the latter.

Goods exports plummeted 25.2% in April from the prior month, the biggest decline in records back to 1989, to $95.4 billion, according to Commerce Department data released Friday. Imports decreased 14.3%, also the largest yet, to $165 billion. Combined, the value of U.S. exports and imports dropped to $260.4 billion, the lowest since April 2010.

The goods-trade deficit widened to $69.7 billion from a revised $65 billion a month earlier. The median forecast in a Bloomberg survey of economists called for a $65 billion gap.

Several members of Trump's regime including his top economic adviser, Larry Kudlow, have said Trump's "biggest and greatest deal" with China is no longer important to him, but that's a misnomer.

The deal is not important to him because it more or less doesn't exist at this point. The benefits of the deal would have been negligible at best as it kept all of Trump's existing tariffs on the books, but now the deal has been effectively canceled out (and then some) by the pandemic.

And who does Trump blame for the pandemic? China.

The Trump regime is waging a rhetorical war on China that escalated earlier this month when the Commerce Department expanded their export controls to cover foreign companies that sell goods to Chinese-owned telecommunications giant Huawei. The Trump regime is also preparing to kick Chinese college students out of the country in large numbers. Justified or not, they're also planning to impose sanctions on China and Chinese officials in response to their policy toward Hong Kong.

None of this had to happen or, at the very least, none of it had to be this bad. I think it's reasonable to infer that China wouldn't feel motivated to exert legal and political control over Hong Kong under a different American administration that wasn't trying to confront them in virtually every sphere.

Trump makes everything worse. His global trade war that primarily focused on China set the stage for much of what is happening right now and while his trade war obviously didn't start the pandemic, it didn't help in the lead up to it nor will it help in the aftermath.

Tensions that began rising when Trump first imposed tariffs on Chinese-made solar panels in the spring of 2018, followed by tariffs on over $500 billion in other goods, have escalated to the point we're at now.

It feels only slightly crazy to suggest that we need to replace Trump in November if we want to avoid an actual war or at least a deeper cold war with China.

  • muselet

    Under a different administration, the real issues with China could have been dealt with diplomatically. Unfortunately, this administration has decided to make China-bashing central to its foreign policy (to the extent it actually has a foreign policy).

    Hong Kong would still have been a flashpoint, given public sentiment there, but the Chinese government would probably not have been so cack-handed about pushing through its national security bill. On the other hand, trade would continue, albeit at reduced levels (my guess is China would probably be importing as much food as it was before the pandemic, but imports of manufactured goods by the US would be ‘way down), exchange students would be left alone, Huawei would be a technical issue to be dealt with technically, et cetera.

    Acting like a small-time mob boss only works when dealing with entities that have little power. Large countries like China have quite a bit of power, as it happens.

    –alopecia

    • KanaW

      Reminds me of the Avengers:
      Cap: “We need a plan!”
      Iron Man: “I have a plan: attack.”