The continued imbalance between imports and exports pushed down Gross Domestic Product growth by 1.25 percentage points in the first quarter, according to data released Wednesday morning at an awkward time for a President seeking to advance a sweeping trade agenda.
The economy grew well below most expectations, at a 0.2 percent annualized rate in the first three months of this year, according to the estimate, with the Bureau of Economic Analysis report indicating that the trade deficit is partially to blame for the disappointment.
Trade has now sapped GDP growth in four out of the last five quarters, according to the BEA, with three of those quarters involving annualized abatements above a percentage point.
“This is undoubtedly due to the impact of the rise in the dollar,” Center for Economic and Policy Research director Dean Baker remarked in reaction to the release. “Unless this rise is reversed, we are likely to see a further decline in our trade position, which will be a drag on growth for the foreseeable future.”
Baker also noted that inclement winter weather likely played a large role in the reported economic deceleration as it did at the start of 2014, and said that the postponement of projects “virtually guarantees strong growth in the next two quarters.”
“Many analysts will undoubtedly seize on these stronger growth reports as evidence of a new boom as they did last year,” he commented. “Hopefully those in policy positions will be aware enough to dismiss such tales of boom.”
However developments transpire, the Obama administration immediately pounced on the data release to claim that it actually strengthens the case for Trade Promotion Authority–a bill that passed House and Senate Committees last week, which would set the stage for up-or-down votes on the Trans-Pacific Partnership, the Transatlantic Trade and Investment Partnership, and other agreements.
“The sensitivity of our exports to foreign demand, especially in an environment where foreign demand is slowing, underscores the importance of reducing trade barriers and opening foreign markets to our exports,” White House economic adviser Jason Furman claimed in a blog post.
Voters, however, are skeptical of this logic, and many would argue that too much enthusiasm for trade, if anything, is responsible for sluggish economic growth. Although most of the organized opposition to the administration’s trade agenda is coming from the left, one YouGov.com survey conducted at the end of March found that only 10 percent of Republicans believe future FTAs will bolster wages, while 39 percent of Republicans and 31 percent of Democrats said they will depress wages.
