Sunday, February 19, 2017

Don't like the data? Change it!

by Bill McBride on 2/19/2017 08:47:00 PM

From the WSJ: Trump Administration Considers Change in Calculating U.S. Trade Deficit

The Trump administration is considering changing the way it calculates U.S. trade deficits, a shift that would make the country’s trade gap appear larger than it had in past years ...

The leading idea under consideration would exclude from U.S. exports any goods first imported into the country, such as cars, and then transferred to a third country like Canada or Mexico unchanged, these people told The Wall Street Journal.

Economists say that approach would inflate trade deficit numbers because it would typically count goods as imports when they come into the country but not count the same goods when they go back out, known as re-exports.
I'm all for constantly evaluating methods, and improving data collection and reporting, but this - as reported - doesn't seem to make sense.

If a car is imported to the U.S., and then is unchanged and exported to a third country, it seems there would be two choices: 1) Count it is an import AND an export, or 2) don't count it as either an import or export (it is just passing through).    But counting the import and not the export makes as much sense as counting the export, but not the import.  Crazy.