Our International Trade Deficit–Down This Month, Up This Year

A graph of the U.S. international trade deficit in goods and services over the past two years by the Bureau of Economic Analysis shows no discernable change, although the surrounding commentary says that the deficit actually increase by $5 billion from June 2013 to June 2014. The latest month, however, showed a reduction of the deficit of $3.2 billion. That June change will help toward an upward revision in second quarter GDP.
That’s the way it’s been going for years now. We get monthly changes, some positive, some negative, but the changes always seem to offset so that the graph over time looks the same. By now we were supposed to be seeing some lasting improvement from our move in the direction of greater energy independence. Well, it hasn’t flowed through to the bottom line.
One reason, I assume, is that our more dynamic economy in terms of invention, innovation, and leading edge manufacturing and business practices, which should increase our net export balance is being offset by greater demand growth as our growth rate—pitiful as it is—exceeds the growth rate of many of our trading partners, especially European.
Perhaps a more fundamental reason is that exports and imports aren’t entirely independent of each other. More exports give us more money with which to import more. More imports give our trading partners more money to buy from us. Any lasting divergence would be corrected in part by internal economic adjustments and in part by small changes in the exchange rate.
It is probably a good thing that the international trade statistics go relatively unnoticed by the public lest calls to “do something about it” lead to foolish policies.

 

Leave a Reply



If you want a picture to show with your comment, go get a Gravatar.