Balance of Trade

Three graphs today.

Balance of trade seems a simple concept. If we buy more than we sell in international markets, we have a trade deficit. If we sell more than we buy we have a surplus. But maybe I have that all wrong, because I can never find useful graphs on the balance of trade. I'm going with what I found yesterday.

I found these three one after the other, just as I am showing them here. First, for the years 1866 to 1969, the excess of total exports over general imports during that century:

Graph #1

Here, the US shows a surplus of exports over imports. I see the growth of trade, as tiny jiggies get bigger in the 1870s and bigger yet in the 1890s. There is a significant increase during World War One, then a return to trend growth in the 1920s. The Depression and Smoot-Hawley stand out as a low spot in the 1930s. Then there is a massive increase during the Second World War. After that war, the massiveness continues (in hundreds of millions of dollars), with perhaps a hint of decline making an appearance during the 1960s.

The second graph shows total trade of goods for the United States, for 1960 to 2013. This dataset was "discontinued" in 2013:

Graph #2

This second graph appears to start out near zero, like the first one. Not so. Hovering the mouse over the graph at FRED shows the trade surplus in the early years runs in the neighborhood of a billion or two -- until 1967:

• 1967 Q1: 1.024 billion
• 1967 Q2: 1.380 billion
• 1967 Q3: 0.774 billion
• 1967 Q4: 0.622 billion
• 1968 Q1: 0.256 billion

And it is all downhill from there -- with jiggies, of course (1968 Q2 = 0.442 billion; 1968 Q3 = negative 0.161 billion, a deficit). Unfortunately, this shift from surplus to deficit occurred only a few years before 1971, when Nixon "closed the gold window". People today all too often say that closing the gold window caused our trade deficits. No. The "gold window" thing was a canary in the coal mine. It was a warning of trouble to come.

The third graph shows the trade balance for goods and services, from 1992 to the latest data (September 2023):

Graph #3

This graph also appears to start near zero, but the first value shown is a two billion dollar trade deficit.

 

The data on the first graph is mostly above zero; on the second graph, mostly below; on the third graph, everything is below zero. So it goes.

The vertical scale of the first graph shows millions of dollars; the other two show billions. But the steps in vertical scale #2 are 40-billion-dollar steps; in #3 they are half as big. So I guess it's not time to "discontinue" the Graph #3 dataset. Not yet.