US Trade Deficit with China Hit All-Time High in 2014

The US trade roach motel: goods come in, but few go out.

 The global financial crisis was attributed to imbalances of the global economy coming undone. In particular, China was too export dependent with limited domestic demand as the income share of capital relative to labor went more and more in the former's favor. Meanwhile, the United States was consuming too much and exporting too little. Fast-forward six or seven years or so later and we have a world economy in which, er, the US still doesn't export all that much as its purchases of manufactures have hit all-time highs. Based on the latest data, full-year figures should show not only imports biting into US GDP but also the absence of any sort of rebalancing. Let's begin with the GDP-killing imports:

Michael Feroli, chief U.S. economist at JPMorgan Chase, wrote in a client note that he's now estimating that gross domestic product expanded at an annual pace of only 2 percent in the last three months of 2014. Feroli called that figure "a little dispiriting," considering that the economy was being boosted at the time by lower oil prices. (The government's first estimate of annualized GDP growth in the fourth quarter was 2.6 percent...)

The gap between imports and exports was $46.6 billion in December, up from $39.8 billion in November. A deteriorating trade picture subtracted 1 percentage point from the government's first estimate of fourth-quarter growth. But with the new data, the subtraction is likely to be even bigger, economists said.

And here is the US being even more dependent on imports from China than ever, which conversely shows how China is still counting a lot on foreign demand:

The details of today's reports were depressing to people trumpeting a U.S. manufacturing renaissance. Alan Tonelson, who blogs on trade and economic issues at RealityChek, calculates that the U.S. ran a record trade deficit with China for 2014 as a whole ($343 billion, up nearly 8 percent from the previous record in 2013) and a record deficit in manufactured goods with the world as a whole ($734 billion, up 13 percent from the 2013 record). 

So much for the global rebalancing fantasy. Don't be surprised to see an aftershock of the global financial crisis in the medium term since, alas, nothing has fundamentally changed.

2/8 UPDATE: China's trade surplus hit an all-time high in the month of January as a slight decline in exports was accompanied by a large decline in imports (especially commodities). As I said, so much for global rebalancing.