The United States' Defining Deficit

            Today, the Dow saw its highest one-day gain in over two months.  After ending on a fairly depressing note last month, this surge in the markets seems to point towards a brighter December.  A weak dollar has been good news for exports, and the manufacturing sector has been riding a 16-month high.  This comes as a welcome for the U.S. automobile industry which has been making a strong push toward increasing its competitiveness in the international market.  For example, Ford announced that it will be opening 100 additional dealerships in China, as emerging markets provide an opportunity to make up for profit losses in the U.S. 

These small steps, like a weaker dollar and increasing our presence in emerging markets is essential to improving the U.S. trade deficit, which stands at a daunting $447 billion for 2010, and only increasing by the minute.  World trade was up 19% in the third quarter of 2010 compared to Q3 2009, but the United States only recorded a 1% increase in exports from Q2 to Q3, while countries like China boasted an increase of 11% in exports in the same time frame.  The United States is clearly struggling with the dilemma of exporting much, but importing much more.

Ever since the U.S. began running a trade deficit in 1975, Democrats have harped on the dangers of running a high deficit.  Republicans have argued that a trade deficit isn’t necessarily harmful, as it could be a sign of robust economic activity. Regardless of the fundamentals, both sides agree that the recent records set by the U.S. trade deficit are unacceptable.  Our dependence on low-priced Chinese goods has led to an astounding 19.3% of our $1.575 trillion in imports to be from China.  Another troubling number is the import of crude oil, which accounted for 8.2% of our total imports in 2009.  We import as much oil as Japan, South Korea, and China combined.  Certainly the recent news of increasing exports and our narrowing deficit comes at an opportune time.  Perhaps with a continued increase in exports and a sincere effort to decrease our dependence on China and foreign oil, someday, we may be able to achieve the seemingly impossible:  a trade surplus.