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U.S. trade gap widens

Mitchell Hartman May 10, 2012

Stacey Vanek Smith: The U.S. trade deficit shot up in March — 14 percent to nearly $52 billion. That, even though our exports hit an all-time high. They were outweighed by imports of oil and goods from China.

Marketplace’s Mitchell Hartman has more.

Mitchell Hartman: You might think record imports would indicate a healthy U.S. economy. After all, we’re out buying stuff — Chinese toys and Italian handbags. But when imports grow so much more than exports, it’s actually a drag on U.S. economic growth.

I asked Greg Daco at IHS Global Insight to explain how economists crunch the numbers on imports.

Greg Daco: When they are bought, they’re a negative for the U.S. because the money that is spent goes out of the United States. But as the products that are imported are used either towards domestic consumption or domestic production, then they are calculated as a positive for the U.S. economy.

So imports add to GDP only when American refineries process foreign oil, or we go to a store and buy that handbag and a salesclerk gets paid. And right now, the money flowing out for imports way outweighs the jobs and income created once they’re here, which is why economic growth will probably now be revised downward, based on today’s report of a widening trade gap.

I’m Mitchell Hartman for Marketplace.

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