U.S. Trade Balance

Chart of the Week for November 26 - December 2, 2004

When a country imports more than it exports a balance of trade deficit is created. As you can see from the chart, this deficit has been increasing since the early 1990s. The recent weakness of the U.S. dollar could help improve these results as exports become more attractive to foreign purchasers and imports become more expensive to domestic buyers. However, the increase in energy prices and weak world economies have unexpectedly increased U.S. imports. Additionally, reduced foreign spending has resulted in less purchasing of U.S. exports. With foreign buyers having reduced their demand for all goods, the weakening dollar has not improved the trade gap for the U.S. Even more troubling is the fact that the presently large negative trade imbalance is a drag on the nation’s gross domestic product (GDP).

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