The U.S. government this morning delivered a super Christmas gift to Americans this morning, and a big fat lump of …Continue reading →
The U.S. government this morning delivered a super Christmas gift to Americans this morning, and a big fat lump of coal to Trump haters everywhere – and especially in the ranks of Democrats, and critics in the economics field and the Once-Mainstream Media. That’s because the latest report from the Commerce Department pegged after-inflation economic growth in the third quarter of this year at a robust 4.27 percent at real annual rates.
This Commerce release was delayed due to the Democrats’ pointless shutdown, and combined the advance and second reads on the nation’s total output of goods and services (gross domestic product, or GDP). The results handily beat the final estimates both of the Atlanta branch of the Federal Reserve and the “Blue Chip” economists consensus that it also tracks.
If it holds, the new third quarter estimate would be the best such performance since the 4.67 percent expansion in the third quarter of 2023.
And more than a little interesting: Tariff-heavy U.S. trade policy and the resulting flows were the biggest contributors to third quarter constant dollar growth – fueling the 4.27 percent increase by 1.59 percentage points.*
In addition, for the second straight quarter, the trade balance improved in the best possible way, with real exports growing, and real imports falling. That is, the new data represents the latest sign that, contrary to most predictions, the Trump tariffs are reducing the trade shortfall, and to widespread claims that a shrinking trade gap typically means faltering growth.
The third quarter’s inflation-adjusted trade deficit came in at an annualized $957.2 billion – a sequential decrease of 9.52 percent. That level was the lowest since the $964.1 billion registered for the first quarter of 2024. Perhaps more important, as a share of price-adjusted GDP, the deficit hit its lowest level (3.98 percent) since the fourth quarter of 2020 (3.88 percent), when the economy was still recovering from the first covid wave.
Combined goods and services exports hit a new record of $2.7037 trillion at real annual rates, a 2.13 percent advance from the second quarter’s $2.6473 trillion. Total imports decreased by 1.20 percent by the same measure, from $3.7053 trillion to $3.6609 trillion. That level was the lowest since the $3.6402 trillion level of the second quarter of 2024.
The constant dollar goods deficit of $1.1613 trillion at after-inflation annual rates represented a 7.16 percent drop from the second quarter’s $1.2508 trillion. And the total was the best since the $1.1298 trillion hit in the fourth quarter of 2023
The third quarter’s inflation-adjusted services surplus of $211.9 billion rose by 6.86 percent to $211.9 billion – the highest level since the third quarter of 210.1 billion. That was the best such improvement since the 10.19 percent jump in the first quarter of 2024.
Real goods exports in the third quarter climbed by 1.81 percent to a new record $1.7225 trillion. This all-time high once more showed how reluctant most foreign economies have been to retaliate versus President Trump’s tariffs. In the process, these results confirmed his judgment that the United States enjoys matchless leverage in global trade affairs.
After-inflation goods imports in the third quarter declined for the second straight month – by 1.94 percent sequentially to $2.9338 billion. That total was the lowest since $2.8977 trillion of the first quarter of 2024.
The third quarter also saw the second straight increase in constant dollar services exports. The 2.70 percent quarterly improvement resulted in a new record of $933.2 billion, and the rate of increase was the fastest since the 3.30 percent recorded in that first quarter of 2024
The smaller amount of price-adjusted services imports were also up sequentially in the third quarter – but by a slower 1.53 percent, to $721.3 billion.
So strong growth, higher exports, lower imports, and a shrinking trade deficit. Not to mention inflation drifting down (but still too high). And anyone out there is going to keep calling the Trump trade policy a failure?
*This sentence is mistaken. The biggest contributor to third quarter real economic growth was not trade but consumer spending, which fueled the improvement by 2.39 percentage points. Apologies for the error.
