A problem for the U.S.: "25 months of falling net goods exports with China"

Posted by scapozzola on 05/03/2012

At Seeking Alpha, Howard Richman says that U.S. trade policy is not working, and that Treasury Secretary Tim Geithner is wrong to have recently presented such a cheerful assessment of U.S. exporting prowess.

A key problem, according to Richman, is that the Obama Administration's goal of boosting exports is unrealistic and misplaced.  Simply put, it's of little help when any increase in exports is far outpaced by a larger growth in imports:

When trade is out of balance, it is net exports (exports minus imports) that determine the contribution of foreign trade to an economy. Negative net exports subtract from aggregate demand and income.

Similarly, Richman says that the U.S. has seen "25 months of falling net goods exports with China"-- not a helpful trend, especially when the U.S. trade deficit with China jumped to a record $295 billion in 2012.

One major stumbling block has been China's continued undervaluation of its currency, which provides a major bost for its exporters.  Richman says that other countries ("emerging market economies") have followed suit:

They are almost all following China's currency manipulation strategy so that they grow rapidly while Europe and America stagnate.

Richman is absolutely right. And without balanced trade, the U.S. will continue to lose ground in manufacturing.

Read more.

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