The U.S. trade deficit unexpectedly shrank in November as growing global demand and a weaker dollar help boost overseas sales of everything from aircraft to cotton.
The gap shrank 0.3 percent to $38.3 billion, the smallest in 10 months, as exports climbed to the highest level in more than two years, according to data today from the Commerce Department in Washington. …
A 10 percent drop in the dollar since March 2009 is making American goods more competitive abroad, lifting demand at companies like General Electric Co. and Boeing Co. that is propelling the factory-led economic recovery. The gain in exports exceeded an increase in imports that mainly reflected a price-driven surge in purchases of crude oil as the global rebound pushes up commodity costs.
The US trade deficit unexpectedly shrank in November but the yawning gap with China widened further, official data showed Thursday ahead of Chinese President Hu Jintao’s visit to Washington next week.
The latest trade numbers come as the United States struggles to repair strained economic relations with the rising Asian power, the world’s second-largest economy and the number-two US trading partner.
President Barack Obama and his administration are expected to discuss trade issues with Hu on his state visit Wednesday, including a key irritant, China’s yuan currency.
The United States complains that Beijing keeps the yuan artificially cheap to boost exports, and China appears on track to beat its 2008 record trade surplus with the US this year.
But not with China. Same old story. The dollar has fallen against the rest of the world and as a result our exports are UP, but China pegs its currency so we can’t compete. (And the other part of the story is oil prices cause imports to rise.)
So …back to the same old, same old? Growing imbalances with China? China currency pegged? Shelling out billions for imported oil? New bubbles, this time in commodities?
Geithner on China Currency
Treasury Secretary, speaking before the trade deficit numbers were released,
Treasury Secretary Timothy Geithner on Wednesday called China’s currency “substantially undervalued” and said Beijing is moving too slowly to fulfill a promise it made in June to allow it to rise against the dollar. Geithner’s remarks came in a speech previewing the administration’s positions in advance of a visit to Washington next week by Chinese President Hu Jintao.
Geithner said that China’s currency, the piracy of U.S. intellectual property and unfair Chinese trade barriers would all be discussed during Hu’s meetings with President Barack Obama and other administration officials.
Economists are forecasting that the overall U.S. trade deficit will keep rising as the U.S. economy recovers, but the hope is that a decline in the value of the dollar against many major currencies will help boost the competitiveness of U.S. exports. The dollar’s value against many foreign currencies has been on a downward trend since March 2009.
Do they think things are getting “back to normal?” Do they think the old “normal” was a good thing? For Wall Street, maybe…
The monthly U.S. goods trade deficit with China increased by $100 million in November 2010, to $25.6 billion.
Said Scott Paul, Executive Director of the Alliance for American Manufacturing (AAM):
“Our trade deficit means lost jobs, closed factories, and a downward pressure on economic growth. President Obama has a unique opportunity to help change this course. In his meeting with Chinese President Hu Jintao next week, President Obama should lay out the consequences for Beijing if it continues its mercantilist ways.
“China accounts for more than 80 percent of the goods trade deficit, excluding petroleum. Lowering our trade deficit with China by putting an end to its currency manipulation, WTO-illegal industrial subsidies, and indigenous innovation requirements will boost the U.S. economy.”
Will We Learn?
We learned from the crisis that the imbalances in the global economy are unsustainable. They cause one after another crisis. President Obama had it right at beginning, when he talked about addressing these imbalances and got G20 to agree to adjustments. But now surplus nations like China and Germany are refusing to change, and the world’s economy is reverting back to unsustainable imbalances. Consumers in these countries need to take action and do something about the mercantilist strategies that are illegal and are hurting them. It is time for us to stop being uncle generous, the world’s consumer, the world’s borrower, the world’s military.
Next week Chinese President Hu Jintao comes to Washington…