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Trade Deficit Increase Not Necessarily a Bad Thing
5 years ago

By Bryan Riley


The U.S. Bureau of Economic Analysis (BEA) announced today that imports and exports both declined in October while the overall trade deficit increased.

Reactions to the BEA report were misleading.

For example, the Associated Press reported: “A wider trade deficit acts as a drag on growth.”

In fact, U.S. trade deficits have almost always heralded a booming U.S. economy. And surpluses are no sure sign of health. Look no further than Greece, for example, which is running a trade surplus while its economy is in shambles.

Some reporters did a better job of explaining the trade deficit’s impact. Jeffry Bartash at MarketWatch reported: “Falling imports, meanwhile, reflect a softer U.S. economy.”

Bartash is right. Americans would benefit from a strong, fast-growing economy that gives us more dollars to spend—whether on domestically made products or on imports.

The bad news in today’s BEA report is not that the trade deficit increased but that exports and imports both declined. The ability to trade more—and to afford more imports—is a sign of economic strength, not weakness. Just ask people in Greece how that trade surplus is working out for them. 

5 years ago

It would also be interesting if some analyst would look at the data in the light of the dropping value of the US dollar vs the currency of some of our trading partners. Are we paying more for out imports than when Dear Leader took office or when the economy was good in 2006?

5 years ago

John, this would be interesting as I would assume we are but I don't know.  Maybe you could volunteer to research this for us and see what you can find.  It would be appreciated.

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