Jump to Navigation
Home

Main menu

  • Home
  • Latest Stories
  • Markets Map
  • Trends and Sentiments
  • Leading Topics
  • News Search
  • Comments and Analysis

Secondary menu

  • Latest News
  • Top Rated
  • Most Popular
  • Archive
  • About Us
  • FE Alpha Manager Norris: The reason I’m so bullish on...
  • Money Brain: Why you’re more likely to trust a financial...
  • Supreme Court wrestles with administrative law judge case
  • 3 Ways To Build Credibility At Work
  • San Francisco Bartenders Look at the Latest Drinks Trends...
  • How 'Black Panther' And 'Greatest Showman...
  • A Surprising, If Lame, Way To Level Up Your Battle Pass...
  • Smartphone FM Radio Capabilities Enhance Public Safety at...
  • If You're A Reader, You'll Want To Book A Trip...
  • The Power Of Rebranding: From Hidden Ridge Vineyard to...

    Rising Trade Deficit Doesn't Bode Well for Long-Term Recovery

    Thu, 06/10/2010 - 15:40 EDT - Seeking Alpha
    • Peter Morici

    Peter Morici submits:The Commerce Department reported the April deficit on international trade in goods and services increased to $40.3 billion from $40.0 billion in March.The trade deficit, along with the credit and housing bubbles, were the principal causes of the Great Recession. Now, a rising trade deficit and continued weakness among regional banks, still burdened by bad loans, threatens to stifle the emerging recovery and keep unemployment near 10% through 2011.At 3.3% of GDP, the trade deficit subtracts more from the demand for U.S.-made goods and services than President Obama’s stimulus package adds to demand. Moreover, Obama’s stimulus is temporary, whereas the trade deficit is permanent and growing again.Subsidized manufactures from China and petroleum account for nearly the entire deficit, and both will rise as consumer spending and oil prices rise through 2010.Money spent on Chinese coffee makers and Middle East oil cannot be spent on U.S.-made goods and services, unless offset by exports.When imports substantially exceed exports, Americans must consume much more than the incomes they earn producing goods and services, or the demand for what they make is inadequate to clear the shelves, inventories pile up, layoffs result, and the economy goes into recession.To keep Chinese products artificially inexpensive on U.S. store shelves and discourage U.S. exports into the Middle Kingdom, China undervalues the yuan by 40%.Beijing accomplishes this by printing yuan and selling those for dollars to augment the private supply of yuan and private demand for dollars. In 2009, those purchases were about $450 billion, or 10% of China’s GDP, and about 35% of its exports of goods and services.In 2010, the trade deficit with China is reducing U.S. GDP by more than $400 billion, or nearly 3%. Unemployment would be falling rapidly and the U.S. economy recovering more rapidly but for the trade deficit with China and Beijing’s currency policies.Longer term, China’s currency policies reduce U.S. growth by one percentage point a year. The U.S. economy would likely be $1 trillion larger today, but for the trade deficits with China over the last 10 years.China has indicated it will not revalue its currency at this time. Some analysts expect only a gradual revaluation if any change in policy occurs—perhaps a few percentage points a year. Such a move would have little consequence for the U.S. trade deficit, unemployment and growth.China views its exchange rate policy as a tool of domestic development strategy but its policy has broad, aggressive and negative international consequences—it is choking growth and imposing high unemployment on the United States and other western countries.Diplomacy has failed, and President Obama should impose a tax on dollar yuan conversions in an amount equal to the amount of China currency market intervention divided by its exports—currently that would be about 30%. For imports, at least, that would offset China’s subsidies that harm U.S. businesses and workers.After diplomacy has failed for both Presidents Bush and Obama, failure to act amounts to no more than appeasement, and wholesale neglect of President Obama’s obligations to advocate a level playing field for U.S. workers.Disclosure: No positionsComplete Story »

    • Original article
    • Login to post comments

    Related

    • Trade Deficit, China's Currency Require U.S. Action Now

      Peter Morici submits:The Commerce Department reported the February deficit on international trade in goods and services increased to $39.7 billion from $37.0 billion in January. President Hu Jintao has told President Obama that China will not revalue its currency in response to U.S. requests. This leaves President Obama with the difficult choice between acting unilaterally or appeasing Chinese mercantilism to the great detriment of U.S.

    • Trade Deficit, China Trade Taxes Economic Recovery

      Peter Morici submits:The Commerce Department reported the March deficit on international trade in goods and services increased to $40.4 billion from $39.4 billion in February.The trade deficit, along with the credit and housing bubbles, were the principal causes of the Great Recession. Now, a rising trade deficit and continued weakness among regional banks threatens to stifle the emerging recovery and keep unemployment near 10 percent through 2011.

    • Trade Deficit Burdens Economic Recovery

      Peter Morici submits:Tuesday, the Commerce Department will report the February deficit on international trade in goods and services. Analysts expect it to increase to $39.0 billion from $37.3 billion in January. My forecast is in line with the consensus.

    • US Trade Deficit Widens; Ignorant Hysteria Predictably Ensues

      The Obama administration today announced May's trade numbers:

    • US Trade Deficit Tumbles As Overall Imports Plunge, Even As Oil Imports Continue To Rise

      In a surprising development, the U.S. monthly international trade deficit decreased substantially in March 2016 from $47.0 billion in February (revised) to $40.4 billion in March, below the $41.2 billion expected, as exports declined by a modest $1.5 billion, a 0.9% drop to $176.62BN from $178.16BN in Feb. At the same time imports outright plunged by $8.1 billion, down 3.6% in March to $217.06BN from $225.13BN in Feb. Curiously this happened just as Canada announced a trade deficit of C$3.4 billion, the widest on record.

    • Trade Deficit Threatens Double Dip

      Peter Morici submits:The Commerce Department reported the deficit on international trade in goods and services increased to $ 42.3 billion in May, up from $40.3 billion in April because of a $3.0 billion increase in the trade deficit with China.Imports are rising much faster than exports, and the overall trade deficit will increase even more sharply when oil prices rebound, threatening the economic recovery.

    • Weak Canadian dollar and energy exports help Canada swing to trade surplus

      Canada’s merchandise trade balance swung to a surplus in February, with rising exports of automobiles and energy outpacing record imports. The surplus of $290 million exceeded the $200 million surplus that was the median of 17 predictions in a Bloomberg survey. January’s deficit was revised to $337 million from an initially reported $177 million, Statistics Canada said Thursday in Ottawa.

    • Offsetting America's Trade Deficit, We've Attracted $7.6T in Net Foreign Investment Since 1990

      The Wall Street Journal reported on Friday that:

    • It’s the Trade Deficit, Stupid

      Peter Morici submits:Since the Democrat’s debacle in Massachusetts, President Obama has been campaigning. In the State of the Union address, his new budget and other staged events for the faithful to gather for hope, the President has the audacity to double down on class warfare and crowd frenzying envy, and tout as success an economic recovery about as thin as the Chicago Cubs World Series record book.

    • Why Free Trade Is Failing America

      Peter Morici submits:No economic policy could better serve Americans than genuine free trade but open trade policies are failing Americans. Free trade is a compelling idea. Let each nation do more of what it does best, and specialization will raise productivity and incomes.

    Latest

    'Black Panther' hits $1 billion globally
    'Black Panther' has made 5 times as...
    "There's No Safety Valve" Mark Mobius Warns Of Massive Market Slump
    "There's No Safety Valve" Mark...

    Markets Map

    Markets Map

    Follow Us

    Follow Us on Facebook, Twitter, Google Plus and RSS LinkedIn Facebook Twitter Google Plus RSS
    S&P 500: 2579.37 0.16% FTSE: 7487.96 -0.07% Nikk.: 22420.08 1.82% DAX: 13465.51 1.75% HSI: 28594.06 1.22% FX: EUR/GBP: 1.1401 USD/EUR: 1.1618 JPY/USD: 114.1510 Commodities: Gold: 1276.1000

    Bullfax.com - Market News & Analysis 2008-2011
    Contact Us | About Us | Terms & Conditions

    Follow Us on Facebook, Twitter, Google Plus and RSS LinkedIn Facebook Twitter Google Plus RSS .

    Secondary menu

    • Latest News
    • Top Rated
    • Most Popular
    • Archive
    • About Us