Enormous, Humongous February Trade Deficit Is More Bad News

Dave Johnson

The U.S. Census Bureau reported Thursday that the February goods and services trade deficit was “$35.4 billion in February, down $7.2 billion from $42.7 billion in January, revised.”

This enormous, humongous level of $35.5 billion drained from the economy in a single month is actually the lowest monthly trade deficit in over five years, when the financial collapse was causing Americans to purchase fewer imports.

This drop was not the result of exports surging. Exports dropped 1.6 percent, largely due to the “strong” dollar, but imports dropped even more, falling 4.4 percent. One reason for this was a port strike resulting in ships backed up to unload imports. Another reason is that non-U.S. economies are still lagging. So, unfortunately, the drop in the trade deficit was not the result of our trade partners finally buying as much from us as they sell to us (actual “trade”), or of American demand for products finally translating into U.S. hiring instead of hiring elsewhere.

A “strong” dollar means that U.S.-made goods cost more in world markets. This is good for Wall Street (capital) but bad for American workers (labor). As American-made goods cost more, it means U.S.-based factories and other businesses get fewer orders, and have to cut back on employees and cut wages.

See also, Reuters: “U.S. Treasury’s Lew says strong dollar is good for America.”

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