An Improving Trade Picture

A weaker dollar and more domestic energy production are taming the U.S. trade gap.

Milton Ezrati of Lord AbbettThis country’s balance of international trade just keeps on improving. Long in deep deficit, which is frequently considered a sign of fundamental economic problems, the United States’ tendency to import more than it exports persists. But the trade deficit has nonetheless narrowed considerably of late. Part of the improvement reflects the currency, for the dollar, though up recently against the euro, has fallen long term against almost all other currencies, relieving American producers of a long-standing pricing disadvantage. Part of the improvement, and the factor that has dominated most recently, stems from the new fracking technology for natural gas and oil extraction and its impact on petroleum imports. This favorable influence promises to become still more dominant in coming years.

Overall, the global economic slowdown and the disappointing pace of expansion in this country have slowed the growth of both exports and imports. Until recently, both seemed to boom with the economic recovery, anemic as it otherwise was. Between mid-2010 and mid-2011, the country sucked in almost 13% more imports of both goods and services, while the rest of the world bought about 14% more from the United States. But in the 12 months from mid-2011 through June, the most recent month for which complete data are available, exports have expanded barely over 7%, while imports have grown just 2.2%. The imbalance of imports over exports has shrunk from a monthly deficit of $50.3 billion in June of 2011 to $42.9 billion this June, an improvement of almost 15%.

About the Author

Milton Ezrati

Milton Ezrati

Milton Ezrati is senior economist and market strategist for Lord Abbett & Co. and an affiliate of the Center for the Study of Human Capital and Economic Growth at the State University of New York at Buffalo. His latest book, Thirty Tomorrows, linking aging demographics and globalization, will appear next summer from Thomas Dunne Books of St. Martin’s Press. See more of his articles about the economy here.

 

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