Don't Look Now, But Our Trade Deficit With China Is Reversing

Obviously, when the economy went into a free fall in late 2008, our imports from China evaporated, and for a brief moment, the trade-deficit haters got exactly what they wanted (if not exactly in the manner how).

Anyway, China has recovered, and the presumption has been that the gap would continue to widen.

But Menzie Chinn at EconBrowser notes that it’s not actually the case. The gap — as a percentage of GDP — continues to narrow, albeit marginally. If the Yuan is revalued, then the gap will probably narrow even more.

But if the trend really keeps going hard in this direction, as Obama’s export-driven dreams conflict with basic reality for Beijing (notably that there’s no short-term alternative to an export-based economy).

Maybe that Yuan revaluation won’t actually come so soon.

trade deficit

Photo: Econbrowser.com

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