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Trade deficits

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  • 14-08-2004 8:01am
    #1
    Victor
    Registered Users Posts: 78,371 ✭✭✭✭


    How are trade deficits like this financed? Surely if a country (or rather an economy) runs consistent deficits then the value of their currency must decline to the point where the can no longer afford the luxury imports and their exports become super-competitive, thereby rectifying the balance.

    Is it a combination of borrowings, repatriated profits and foreign investment in the USA that allows them to continue spending thus?

    http://www.rte.ie/business/2004/0813/US.html
    Record US trade deficit in June
    August 13, 2004 15:37

    The US trade deficit hit a record $55.8 billion in June, as the biggest drop in exports in nearly three years combined with record imports.

    Analysts had expected the deficit to widen, but predicted a gap of just $47 billion.

    The Commerce Department said exports fell 4.3% to $92.8 billion in June, the biggest decline since September 2001 and the weakest performance since February. At the same time, imports climbed 3.3% to an all-time high of $148.6 billion, partly reflecting a run-up in oil prices.


    The trade report showed the politically sensitive trade gap with China widened to a record $14.2 billion. US manufacturers and unions complain that Beijing's policy of holding the value of its currency steady against the dollar has given it an unfair trade advantage.

    The report also showed the US trade gap with Mexico reached a record.

    For the first half of the year, the trade gap came in at $287.7 billion, putting it well ahead of the same period last year and on track to break last year's record $496.5 billion.

    The latest survey from the University of Michigan shows that US consumer sentiment weakened in early August to 94 points, from 96.7 in late July. The survey coincided with weak jobs news, days after the US government announced that the economy had generated just 32,000 extra jobs in July, disappointing analysts who expected a gain of at least 240,000 jobs.


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