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Category: US Trade Deficit

This category includes articles that discuss the balance of trade of the United States, usually with regards to such topics as foreign holdings of US dollars, US credit markets, and the flow of funds.

The balance of trade (or net exports is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation’s imports and exports. A positive balance of trade is known as a trade surplus and consists of exporting more than is imported; an negative balance of trade is known as a trade deficit or, informally, a trade gap. The balance of trade is sometimes divided into a goods and a services balance. [Wikipedia]

Foreign trade:

Falling US dollars and exports

Dollar falls after nine-eleven ...

When the US fiscal deficit grows rapidly and Americans are reluctant to save, more dollars in foreign hands are needed to absorb the necessary issuance of government bonds. Should the trade deficit begin to shrink, foreigners will have less dollars to finance the United States. The combination of deficit spending, low domestic saving, and a slowing in the growth of the trade deficit makes inflation more likely.

How long will it take?

Working off the US trade deficit

International trade

Foreigners hold $16.8 trillion in US financial assets as a result of selling more goods to Americans than they buy from them. Since the ‘deficit’ is all in dollars, the United States has no problem in ‘paying it off’.

One way this ‘deficit’ could ‘go away’ would be for US exporters to sell $16.8 trillion more in goods abroad than Americans import from abroad.

Another would be for foreigners to use their dollar balances to buy non-financial assets in the United States, like real estate.

Still another way, would be for Congress to engage in deficit spending to a degree that the dollar inflates and becomes worthless.

The Obama administration may be moving towards the last alternative.

US Trade Deficit 2006

Growth of trade imbalance slows

Rate of Growth of US Trade Deficit Slows

According to a US Bureau of Economic Analysis release of July 12, 2006, the US trade deficit leveled off during 2006, with a difference between imports and exports of goods and services of $63.8 billion in May 2006.

Since the trade deficit is a major source of funds for the US bond market, a slowing of the rate of growth of the deficit will effect interest rates.

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