What happens when the U.S. trade deficit goes up? (AKA: When a tree falls in the forest...)

Posted by scapozzola on 05/10/2012

The U.S. manufacturing sector has lost more than 5 million good-paying manufacturing jobs since 2000.  Those lost jobs are the consequence of a poorly conceived trade policy that has allowed U.S. industrial know-how and productivity to slip overseas, much of it to China.

A perfect example-- the $295 billion trade deficit that the U.S. racked up with China in 2012.

That money continues to leave the country, as evidenced by today's monthly trade figures, which showed the U.S. losing a net $51.8 billion in goods and services, including $21.7 billion in goods with China.

Simply put, the U.S. is importing far more than it is exporting.  And this net deficit continues, month after month...

The question is, what's the reaction on Capitol Hill to yet another ho-hum announcement of dollars leaving the country?

In The Hill, Vicki Needham reported that the "nation's trade deficit picked up pace in March behind a record-level of imports," as imports "hit a record $238.6 billion."

Needham quoted Alliance for American Manufacturing (AAM) Executive Director Scott Paul on the implications of a rising trade deficit as well as the thorny issue of China's deliberately undervalued currency:

"The widening March trade deficit is bad news for the economy," said Scott Paul, executive director of the Alliance for American Manufacturing (AAM).

"For one thing, the expanding trade deficit means that growth in GDP will be lower," he said.

Paul said surging imports indicate that the U.S. and China are falling back into bad habits.

He argues that Beijing has not meaningfully adjusted the yuan’s value against the dollar this year, creating a larger trade gap.

Thankfully, some on Capitol Hill are watching the China issue:

Meanwhile, congressional lawmakers and manufacturers contend that the Chinese currency is undervalued against the dollar and gives the Chinese an edge in international trade.

Unfortunately, a currency bill currently languishes in the House, despite a majority already having cosponsored it. Click here to contact your elected officials.  Urge them to get a currency bill passed.

Read more about the latest monthly trade deficit.

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