Dept. of Commerce: US Trade Deficit Balloons
At a time of growing desperation for many Americans, the Department of Commerce released data on Tuesday, revealing that the US trade deficit rose by 4.8% to $42.3 billion in May. This is the largest gap in nearly two years and it came in the backdrop of expected trade deficit figure of $39 billion for the month.
The U.S. trade deficit with Canada, the largest trading partner (19.7% of total trade), went down to $2.3 billion from $2.8 billion, however, the deficit against China (3rd largest trading partner) went up to $22.3 billion from $19.3 billion in April. A trade deficit means America is importing more goods than exporting.
Many economists saw silver lining in the fact that the U.S. exports grew 2.4% to $152.3 billion, which was the highest since November 2008. This is the evidence for some experts that international demand for U.S. goods are continuing to go up and eventually the nation is going to see gross domestic product growth in the upward direction.
The pessimists on the other hand pointed to the 2.9% growth in the imports which took the total to $194.5 billion. It is the trade deficit stupid, the deficit- hawks shout from the rooftop, growth in export alone is immaterial so long appetite for foreign goods keeps on rising.
Mark Wieczorek has compiled some interesting data on his blog site that gives the history of US trade deficit graphically. Until the late 1960s the US export and import were nicely balanced out. In the early 1970s the imports started going up slowly, and at the beginning of 1980s it started growing exponentially.
The export as well rose to keep the trade balance small till late 1990s, when the balance turned sharply negative and got worse progressively. In one of the chart—The Top 20 Nations by International Trade—Wieczorek shows the trade balance as a percentage of GDP, in there, it is easy to see how alarming the condition of the U.S. economy is.
Increasing trade balance is followed by shrinkage of economy and the prospect of decreasing worth of the nation’s currency. Many see the solution to this problem in reduction of imports; however, reduction of imports cannot happen in vacuum. For any effecting trade balance deficit reduction it is imperative that U.S. industrial production grows significantly, and cost of production stays competitive in relation to rest of the world.
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