The recent crisis has caused a sea change in the US trade balance. Sure, we’ve seen this in the aggregate data, with the deficit shrinking, yet there is more to it. Stripping out trade related to China and oil (two gigantic factors, obviously), the US is actually experiencing a massive rebound in its trade balance, to the point of surplus.
Why? Firstly, this is because total trade ex-petroleum has jumped substantially toward a net surplus.
Secondly, we’ve seen strong trade performance from US capital goods and industrial supplies ex-oil.
Thirdly, if we then examine the US trade balance by trading partner, we see that the trade deficit with China alone is equal to that with the rest of the world.
Thus if you strip out China, there is a net deficit due to oil-related trade alone. So strip out the oil trade and voila... the US has a trade surplus. What’s important is that this trade balance has strengthened substantially and looks to be in an uptrend.
A retrenched US consumer can be thanked for the fact that US imports have fallen substantially. And thank the crisis for forcing thrift and economic re-adjustment.
(Charts from Capital Economics, “US Economics Weekly”, 17 August 2009)
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