Today the U.S. Bureau of Economic Analysis announced that the trade deficit for July fell by $6.8 billion. Exports increased by $6.2 billion and imports decreased by $500 million. Historically, decreasing trade deficits are often a sign of economic weakness. When workers are unemployed, they have less money to spend. As a result, fewer goods are imported and the trade deficit may decrease. For example, the U.S. trade deficit fell by more than 50 percent from 2007 to 2009 as our economy weakened and unemployment increased. The amount of freedom …
The U.S. Commerce Department today announced that the trade deficit for April was $43.7 billion. This number is misleading because it implies a “deficit” in terms of dollars leaving the country, which is not the case. For example, the trade deficit numbers do not include the billions of dollars foreigners spend on U.S. Treasury bonds to help finance our government’s enormous budget deficit. Last year, foreigners spent an average of $59 billion per month on U.S. Treasury bonds. Also not included are the dollars people in other countries invest in …
America’s trade deficit rose in January. Many times an expanding trade deficit indicates an expanding economy and more American jobs. In January, this may not have been true. The single biggest factor in pushing the trade deficit higher in January was higher oil prices. Unfortunately, these may also push the trade deficit higher in February, March, and perhaps beyond. Protectionists who don’t want to let Americans freely make their own choices are already vocal in denouncing the higher trade deficit. This is actually a bit strange, since the January deficit …
Consider these recent print headlines: Economic Growth Slowed by Trade Gap; Economic Growth Cut Sharply Due to Trade Gap; and Economy Slows to 1.6 Percent as Trade Gap Widens. The people who wrote those headlines and the corresponding articles must have awfully short memories. Last year, the trade deficit fell by 46 percent. Imports declined by 23 percent. Analysts who believe trade deficits and imports are a drag on the economy should have been thrilled. But here is the rest of the story: Real GDP fell by 2.6 percent and …
When economists forecast the economy, they tend to draw straight lines. They figure out where we are and where we’re going, and they plot a line. In fact, neither contractions nor expansions are ever smooth. For various anomalous reasons in the economy and in the data, reported GDP movements are jagged. The reported economy accelerates, slows down, jumps, and pauses. So one ought to hesitate before reading too much into the latest economic data. However … The recent report on second quarter growth showing a reasonably strong 2.4 percent pace …
Critics of free trade have used funny math to mislead Americans for decades. It may be time to send these critics back to grade school, so they can learn how to add and subtract. Consider the following interpretation of this May’s international trade statistics: “Oil and consumer goods from China account for nearly the entire trade deficit.” Don’t you believe it. Suppose your best friend spent $1,000 more than he made in May. Say he earned $2,000 and spent $1,000 on housing, $1,000 on clothing, and $1,000 on food. What …
On July 13, the government released international trade statistics for the first five months of the year showing a growing trade deficit—and almost no one got the story right. Here are some examples: “Trade Deficit Gets even Worse,” announced the July 13, 2010 Yahoo! Finance headline. “Trade Deficit’s Increase Seen as an Unwelcome Surprise,” reported the Sacramento Bee. “Surprise Jump in Trade Deficit Worries Economists,” warned the Los Angeles Times. “U.S. Trade Data for May Presented yet More Unfortunate News for the U.S. Economy,” reported The Wall Street Journal.
The Obama Administration, the Democratic Congress, and their friends in organized labor are quick to blame unemployment on the trade deficit. Facts don’t support that assessment. The historical record shows a *positive* correlation between aggregate trade deficits and job creation – a trade deficit signifies *more* jobs. That’s because trade deficits go up when prosperity is increasing and job growth is rapid. The dollars Americans spend for foreign goods and services are then recycled into the American economy in the form of foreign investment. When that investment goes into the …
New U.S. Commerce Department statistics on America’s economy highlight growth in the U.S. trade deficit of $3.2 billion dollars between October and November 2009. That’s good news for Americans. The statistics also show real GDP rising 2.2 percent in the third quarter of 2009, as well as growth in personal income and consumption in November 2009. It is no surprise that rising economic activity and a growing U.S. trade deficit go hand in hand. As the economy and incomes grow, business and consumer demand for all goods, including imports, rises. …
Each day in Minnesota and all across the nation, billions of dollars worth of products begin their journey to be sold overseas. American farmers, manufacturers, and businesses rely on exports to strengthen and grow both their bottom line, as well as our economy’s. Free and fair trade agreements help spur economic growth; improve efficiency and innovation; create better, higher-paying jobs for hard-working Americans; and increase the availability of lower-priced products here in the United States. Furthermore, the role of free trade as an expression of liberty and opportunity for all …
