At least Americans are buying things
The U.S. trade deficit shot up in its biggest monthly jump in a decade. Imbalances between what we buy from overseas and what we sell abroad can be an economic drag, so John Dimsdale takes a look at the brighter side.
Cargo ships unload their shipping containers at the Port of Miami in Florida. (Joe Raedle/Getty Images)
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KAI RYSSDAL: Maybe it's just me, but it feels like we've been talking about the dollar a lot lately. How it's not all that healthy compared to a lot of other currencies. One saving grace has been that a weaker dollar means America-made goods are a better deal overseas. So it was some surprise this morning when we learned the U.S. trade deficit shot up in September. A whole bunch, too -- the biggest monthly jump in a decade. Imbalances between what we buy from overseas and what we sell abroad can be an economic drag.
Our Washington bureau chief John Dimsdale reports there is another way of looking at it.
John Dimsdale: At least American consumers are buying things again. Yes, the cheap dollar helped boost exports 3 percent. But imports jumped nearly 6 percent. Some of that was due to higher prices for imported oil.
But Morgan Stanley's Ted Wieseman says the rest can be attributed to economic recovery.
Ted Wieseman: It's definitely an encouraging medium-term sign that the imports and exports are both recovering pretty strongly. Y'know, it's hard to be terribly disappointed by that strong an import number, because it ultimately does reflect the strength of domestic demand.
Most economists expected the dollar's decline to keep trade deficits in check. But Clyde Prestowitz with the Economic Strategy Institute says the dollar's not falling everywhere.
Clyde Prestowitz: The big Asian countries, China foremost, but Korea, Taiwan, Singapore and many others, are pegging their currencies to the dollar. So the dollar has not weakened against them.
That could be changing, at least a bit. China has been sending signals it will let its currency, the yuan, move higher against the dollar.
Former Commerce Department trade official David Rothkopf says that's not because of any skillful diplomacy by President Barack Obama.
David Rothkopf: China is increasingly becoming a consuming economy. And it needs a strong yuan so that when it imports things, it gets more value for each yuan used.
In the future, Rothkopf expects the yuan to rise a bit and the dollar to fall a bit more. Both trends should help bring trade between the two countries more into balance.
In Washington, I'm John Dimsdale for Marketplace.
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From Atlanta, GA, 11/16/2009
"So it was some surprise this morning when we learned the U.S. trade deficit shot up in September". Are you kidding? Anybody with half a brain realizes that a weak dollar means our trade imbalance will increase because we are a NET IMPORTER. Until that balance shifts, it won't change. I wrote as much on another Marketplace story last week. I thought Marketplace was smarter than they are appearing.
From Minneapolis, MN, 11/15/2009
My biggest concern is that we produce so few basic goods in this country. I tried to find a domestic shoemaker to make a custom set of shoes. All the ones I pulled up are based overseas. Foreign based goods have been less expensive to produce, but have cost domestic jobs. If the value of the dollar declines, we may still have to buy imported goods because we won't have domestic goods available.
11/13/2009
For most of manufacturing goods dollar value does not matter because yuan is pegged to dollar and you know who manufatures most of the goods.
Yes, weak dollar may be good for travellers from outside the country.
The main benefit of cheap dollar for big banks is to borrow here and invest overseas. (carry trade)
From Napoleon, MI, 11/13/2009
Why do Marketplace’s commentators keep parroting that ridiculous line about a cheap dollar “making American goods cheaper abroad” without acknowledging the obvious? While the statement is true in its “naked” form it totally ignores the corollary that it means we have to sell more stuff just to stay in place.
Suppose, for example, that the dollar is one-to-one with the Elbonian drudge. Suppose that for reason that aren’t clear each month Americans buy 5 Elbonian wadgets for 1 drudge apiece, and sell them 4 American widgets at $1 apiece. The trade deficit is $1 per month. Now let the exchange rate fall to $1.20 to the Elbonian drudge. We now pay $6 for the same 5 wadgets, yet we still only receive $4 for the 4 widgets. The trade imbalance has risen to $2, double what it was. Only if the Elbonians increase their purchase of American widgets to 5 per month do we stay where we were. In fact, if we want to erase the trade deficit, instead of a 25% increase in export of widgets, we now need a 50% increase.
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