Recession's effect on trade balance

TEXT OF STORY

Scott Jagow: So much has shifted during this economic fallout.
Speculation and risk have given way to Treasury bonds. Concern about inflation has morphed into concern about deflation. And the U.S. trade balance with China and other countries has shrunk from the Grand Canyon to most of the Grand Canyon. We get the latest trade deficit this morning. Here's Marketplace's John Dimsdale.


John Dimsdale: A weaker dollar and growth overseas have boosted U.S. exports by 15 percent. And the sputtering U.S. economy means fewer imports. Could more balanced trade be the silver lining in the current recession?

Peter Navarro: More like a silver bullet.

Economist Peter Navarro says China is moving quickly to prop up U.S. demand.

Navarro: In the last few months, they've significantly raised their export subsidies and they've significantly devalued their currency relative to the dollar. It's not fair trade and it's not good for America.

Navarro says struggling consumers will snap up cheap Chinese products, keeping the deficit high. And that's fine with economist Dan Griswold at the Cato Institute. He says foreign countries that make money off the U.S. then invest it here.

Dan Griswold: The negative side of balanced trade is we'd have less capital coming into the United States and going to work here in our own economy.

Griswold says the U.S. benefits when trading partners have a stake in strong U.S. demand for their products.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.

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