Early Trade Woes

Total U.S. merchandise imports fell significantly in both August and September of this year. Imports fell by about 5 percent in each month (figure 1). While trade values are volatile month-to-month, declines were not nearly so large in 2007, suggesting troubles to come. These findings come from a new report by Caroline Freund, a trade economist at the World Bank.

Imports from the Middle East and North Africa and Sub Saharan Africa saw the largest declines, falling by more than a quarter in September relative to the preceding month (table 1). Despite the sizeable drops, the trade values in September 2008 remained above trade values in September of the previous year in all regions.

Imports of minerals, vegetables, wood, and transportation products recorded the largest drop, which probably reflects falling commodity prices. This also explains the large drop in imports in the Middle East and Africa, which mainly export raw materials. Moreover, wood and transportation products were imported in values below their September 2007 levels. Imports by air fell significantly in August but picked up in September, with the exception of Africa.

The real trouble in international trade started in October, and these figures are only going to be available on December 11. It will be interesting to see whether the much-talked-about problems with trade credit are apparent in the October data, or whether the real issue was elsewhere: falling commodity prices.