The U.S. November trade deficit was $63B, but that’s not the important thing

A bit of basic arithmetic courtesy of some fresh data we got Tuesday morning from the Commerce Department: In November, the United States exported about $254 billion in goods and services to other countries, and that same month, we imported $317 billion in goods and services from other countries.

​Subtract the 4, borrow 1 from the 3 … by my math, that means the United States had a trade deficit of $63 billion that month — that’s exports minus imports.

​​A $63 billion trade deficit in one month does not sound good. And by this coming November, when that whole presidential election thing happens, my bet is you’re going to hear a lot more about it. But most economists aren’t too worried.

The first thing you should know about a trade deficit is that unless it’s much, much bigger than it is now, it does not really matter to the overall U.S. economy, said Scott Lincicome, an economist at the Cato Institute.

That’s mostly because when Japan sells us a sedan or France sells us a bottle of pinot, they typically plow those dollars back into the U.S., either investing in a new factory or buying government debt, he said.

The second thing you should know is Tuesday’s news that the trade deficit shrank in November. That’s not necessarily a good thing — it means we’re buying less stuff.

“Counterintuitively, an expanding trade deficit is typically associated with stronger economic growth in the United States,” Lincicome said.

While the overall trade deficit number is not that illuminating, bilateral trade deficits do tell economists something about shifting geopolitics.

“The trade deficit with China has recently narrowed. And again, people will say, ‘Well, that’s great.’ But in fact, it’s moving to other locations,” said Mary Lovely with the Peterson Institute for International Economics.

Tariffs and nearshoring policies mean we’re buying less from the Chinese but more from countries like Vietnam and Mexico.

Not that Lovely expects to hear that much nuance come campaign season. She said candidates use the trade deficit to paint whatever picture they want.

And politicians tend to paint in black and white.