The gargantuan US trade deficit?

Now, trade deficits are like hot potatoes.

Not surprisingly, their trade deficits have been shrinking.

Perhaps the biggest weakness in the true believers argument is the trade deficit.

Meanwhile, as all of this happens, the US trade deficit mounts.

America's fiscal and trade deficits are intimately linked.

Nothing works as potently to inflame protectionist sentiment as large trade deficits.

By maintaining an undervalued currency, China is preventing the US from reducing its bilateral trade deficit.

Thus, in order to keep the current account deficit stable, the trade deficit must shrink. And the only way for the trade deficit to shrink substantially is for net imports to fall, which requires either a relatively sharp decline in the value of the dollar, thereby raising import prices, or a depression in the US.

Thus, in order to keep the current account deficit stable, the trade deficit must shrink.

Indeed, Mexico s trade deficit with China reached 9 billion in 2003.

The US is running an 800 billion annual trade deficit in traditional goods and services.

In short, substantial RMB appreciation would reduce the bilateral US China trade deficit and China s overall trade surplus significantly, but it would do little to reduce the overall US trade deficit.

Second, America's huge trade deficit may be a major source of global instability.

The result is a trade deficit now standing at over 400 billion per year.

Indeed, rapid growth in investment may translate into high import growth and trade deficits.

In that case, the trade deficit recorded in March could be at least 40 higher.

For example, America s huge agriculture subsidies contribute to its fiscal deficit, which translates into a larger trade deficit. But agricultural subsidies have consequences for China and other developing countries.

For example, America s huge agriculture subsidies contribute to its fiscal deficit, which translates into a larger trade deficit.

In both scenarios, US employment would not increase and the trade deficit would not diminish.

Moreover, a change in China s exchange rate would do little to alter the multilateral trade deficit in the US.

In the case of the US, heavy dependence on imported oil has worsened the trade deficit and further weakened the dollar.

If that country had its own currency, the exchange rate would decline, benefiting exports and impeding imports.

The dollar is declining because only a more competitive dollar can shrink the US trade deficit to a sustainable level.

Since 1980, trade deficits have been dismissed as the outcome of free market choices.

In a multilateral trading system, large bilateral trade deficits are often balanced by bilateral surpluses with other countries.

Over spending countries such as the United States and other Anglo Saxon economies that were over leveraged and running current account deficits now must save more and spend less on domestic demand.

Wages have stagnated despite strong productivity growth, while the trade deficit has set new records.

To maintain growth, they need a nominal and real depreciation of their currency to reduce their trade deficits.

The problem currently is that a trade deficit has emerged at a time when the national saving rate is as high as 51 .

So the dollar would have to stay at its current level to continue to create the large trade deficit and resulting capital inflow.

Previously, trade deficits were viewed as a serious problem, being a leakage of demand that undermined employment and output. Since 1980, trade deficits have been dismissed as the outcome of free market choices.

Previously, trade deficits were viewed as a serious problem, being a leakage of demand that undermined employment and output.

A Tricky Trade Treaty

This vending machine is out of order.

The mall is deserted.

The mall is open.

China might want oil from the Middle East, but those in the Middle East with so much wealth concentrated in so few hands might be more interested in Gucci handbags than in China s mass produced goods. So China can have a trade deficit with the Middle East and a trade surplus with the US, but these bilateral balances indicate nothing about China s overall contribution to global imbalances.

So China can have a trade deficit with the Middle East and a trade surplus with the US, but these bilateral balances indicate nothing about China s overall contribution to global imbalances.

That made sense when they needed those reserves to be very liquid so that they could bridge temporary trade deficits.

By my calculations, the dollar still needs to go down another 15 if the US trade deficit is to go back towards balance.

The US trade deficit has declined from 60 billion a month to just 26 billion, according to the most recent data.

A country s trade deficit equals the difference between domestic investment and savings, and developing countries are normally encouraged to save as much as they can. Evidently, China s population has more than responded to such admonitions.

A country s trade deficit equals the difference between domestic investment and savings, and developing countries are normally encouraged to save as much as they can.

This deficit reflects an underlying research deficit.