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August 17, 2001

Ever-Widening Trade Deficit

Q: What is your opinion on the Trade Deficit figures released today?

A: Not only did the gap in goods and services trade grow to $29.4 billion in June from $28.5 billion in May, according to the Commerce Department, but US exports fell to the lowest level in 16 months. The widening trade deficit is clearly not a good sign for the US economy.. The drop-off in imports shows that US consumers and businesses are buying less. At the same time, the wider decrease in exports tells us that demand abroad has begun to taper off.

Exports from the US fell categorically. The only sector showing growth was autos and auto parts exports, but, according to the Dismal Scientist, this may just be the result of "intrafirm exports by foreign firms located in the US," not an increase in American cars shipped abroad.

It looks more and more like we are exporting our current economic slowdown around the globe. And as other economies slow, they buy fewer goods from us, which only hammers our economy even more. More ominously, the fact that US exports are falling faster than imports means that the US economy may suffer more than most in the looming global recession.


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