Trade Balancing Act

Lots of people are worried about trade. Last year the trade deficit was over 5% of GDP. That’s a lot of potential jobs. Many commentators feel that the dollar has to fall dramatically in order for the US economy to become competitive enough to balance things out.

I think that this is too simplistic. Look at the details. Of that 5%, 1½% is oil imports. A lower dollar won’t help with those. Another 1½% is with China. The dollar’s already falling there. A lower exchange rate against the Euro or the Yen should reduce their exports to us, but at some point their economies will weaken, and they’ll become unable to buy our stuff, no matter how cheap it gets.

A man’s life doesn’t consist in the abundance of his possessions, and a nation’s wealth isn’t measured by how much it sells. Our exports are already growing dramatically. A lower dollar? That only adds fuel to the fire.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-03T18:06:20+00:00 April 11th, 2008|Global Market Update|0 Comments

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