April 12, 2005
The AP reports on the February trade deficit. Where is my J-curve?
The New York Times > AP > Business > Trade Deficit Reaches All-Time High in February: WASHINGTON (AP) -- The U.S. trade deficit, exacerbated by surging imports of oil and textiles, soared to an all-time high of $61.04 billion in February. The Commerce Department said Tuesday that the February imbalance was up 4.3 percent from a $58.5 billion trade gap in January as a small $50 million rise in U.S. exports of goods and services was swamped by a $2.58 billion increase in imports.... For the first two months of this year, the trade deficit is running at an annual rate of $717.2 billion, a full $100 billion above the record imbalance of $617.1 billion set for all of 2004.
Trade deficits of this magnitude have raised worries among economists about America's ability to continue to attract the foreign financing needed to cover the shortfall between exports and imports. If foreigners decided to hold fewer dollar-denominated investments such as stocks and bonds, it could trigger steep declines in U.S. stock prices and a sharp increase in interest rates.... The Bush administration argues that the deficit primarily reflects the fact that the U.S. economy has been growing at a much faster pace than the economies of its major trading partners, pushing up imports while dampening demand for U.S. exports. Treasury Secretary John Snow was expected to use a Saturday meeting of finance officials from the Group of Seven major industrial countries to once again lobby for Europe and Japan to pursue more growth-oriented policies.
The U.S. dollar has been declining for three years, a fact that should help narrow the trade deficit by making imports more expensive to American consumers while making U.S. exports cheaper. However, economists say the dollar needs to fall further to deal with the widening trade deficit, and they are predicting a further increase in the trade gap this year.... Demand for foreign petroleum products shot up 10.3 percent to $18.2 billion, the second highest level on record, surpassed only by $19.6 billion in imports of petroleum last November....
Posted by DeLong at April 12, 2005 11:50 AM