NEWS: U.S. Trade Deficit Hits Record $665.9B in 2004

The U.S. trade deficit reached an all time high in 2004 with a total of $665.9 billion. This figure bested the previous number my more than 25 percent. The Bush administration indicated that the U.S. economy is growing faster than other parts of the world which is pushing up imports. The record was also set in as percentage of U.S. gross domestic product at 5.7.



Alan Greenspan has indicated that the trade deficit will resolve itself and there is no reason to panic. This is the problem with a global economy that is dependent on oil. Labor costs will always be cheaper somewhere else. Add to that a huge dependence on oil and your going to run deficits now and then. Alternative energy sources should be funded and researched. A return to Nuclear power is one viable option. Better safeguards, more controls etc would allow us to shift a significant percentage of oil and gas used for electrical generation.

I agree with Mr. Greenspan. The Trade Deficit will solve itself through innovative product offerings that are only made in America. What that will be who knows. It sure isn't going to be Robotics, I have a feeling that Detroit may be leading the charge back to a more robust export sector IF they get into Hybrids and take the global lead in Fuel Cell cars. What IS more worrying is the Budget Deficit and the growing financial foreign debt.

[edit on 16-3-2005 by sardion2000]

It will solve itself, will it? The US trade deficit has been growing since 1992, when it last actually fell to a value of just under $50billion deficit. This isnt a short term issue, and it wont solve itself.

Manufacturing is going overseas, jobs are going overseas, where is the capacity for correction going to come from? Intel now have fab plants and research plants overseas (the Pentium M chip, the chip that will replace the P4 in all systems came from a research plant in Israel) which is indicative of how the tech industry is going. Even US companies are sending their dollars overseas to supply the US public with goods.

It doesnt look good, by any means, especially as sardion2000 said with the Budget deficit and foreign debt to factor in too. Take into account the extremely low value of the dollar at the moment, and you could say that if it was any other country, they would be looking at bankruptcy. The US Government needs to deal with this issue now.

A lot of US investment relies on external (read foreign) investors buying up assets in the US. This will quickly lead to most of the US actually being owned by other countries - not something you want!

Heh, you're ignoring that the US dollar is actually GOOD for the export sector. These things ebb and flow and right now the trade defecit is starting to level off, do not listen to the pundits. Do your own research assuming you know how, you may not and that is not a knock against you as alot of people are confused by Macro-Economics. Google up Mems and Nanotechology. That is the future and let me tell you there ain't no way those industries are going to be outsourced. Way to hi-tech and expensive to do so it has to be indigenous. We are entering a Globalised economy where there is going to be winning industries and losing industries. In order for the US private sector to be on the winning side they have to do the follow. Invests heavily in Nanotech (already happening to the tune of over 10 billion last year alone in the USA, its growing by around 20 % a year too). Invest in bringing Hybrids to market FAST(in the next 12 months..starting to happen already. Invest in more prize initiatives like the X-Prize for different industries(again it's already happening)

You see the USA may not be the premier economic superpower they are now when all is said and done, but they will be in good shape going forward until about 2050 which is when all projections start to break down and some people call this point the "Technological Singularity". Remove the political blinders, the Trade Deficit has been overhyped to an extreme degree. Budget defecits and Foreign Debt is more important in the long run IMO.

One last note, RichardPrice you do know what a Knowledge Economy is right?

I read overhere

www.gravmag.com...

that about 30 percent of the deficit can be attributed to energy import costs (wich also explains record earnings of Exxon-Mobil despite alarming deficit).

I would think that once the Oilpeak gets in full effect, even the oilcompanies can't stop a switch to other fuels, but they already agreed with Bush that this will be still a fossile fuel so they can still capitalise on their knowledge and investment in laid infrastrucures: domestic coal, of wich the usa gots a resource of at least 700 years! Nuclear will come back also in the shape of 4th generation gascooled reactors with about 40 percent efficiency.

So, there is certainly potention to take a chunk out of the deficit, but if it will be enough ?

Well, I guess they can always close the gap overnight if they stopped spending so much on defense, but defense seems to be one of the most profitable industries after oil currently...

I really hope at some point spacecolonisation and nanotech will give a new golden age and wars will temporarily will be more in the background with enough money to spend for the commnon man.



[edit on 16-3-2005 by Silenus]

Originally posted by sardion2000
Heh, you're ignoring that the US dollar is actually GOOD for the export sector.

Its good for the short term, and its only good if you dont owe a lot of money to foreign sources. A low dollar value is good for exports, but its absolutely cr*p for imports and paying back your debt, and because of this the low dollar value will hurt the US economy in the longrun and is not a fix.

Google up Mems and Nanotechology. That is the future and let me tell you there ain't no way those industries are going to be outsourced.

Nanotech has been 'the future' for the past 50 years, and we are no closer now to having an industry based around it that will support an entire economy. Certainly there has been movement in the area, but nothing that amounts to an opening of a new industry.

Way to hi-tech and expensive to do so it has to be indigenous.

People said the same thing about microelectronics, fab plants etc and you would be hard pressed to find a computer on the shelf now that has anything more than an Intel CPU produced in the US. Anything the electronics industry comes upwith these days can be up and running in Taiwan or China within the week. It wont take the 30 odd years that it took the electronics industry to be outsourced, these technologies will be available from asian sources within a year or two when they become mainstream in the US. And they will do it cheaper and in larger quantities.

We are entering a Globalised economy where there is going to be winning industries and losing industries.

In that case, the US will pretty much always loose out. Labour is cheaper in the 2nd world, materials are cheaper, property is cheaper. THere is only two reasons to go to the US these days, and that is either research or consumers.

Remove the political blinders, the Trade Deficit has been overhyped to an extreme degree. Budget defecits and Foreign Debt is more important in the long run IMO.

If you dont deal with a trade deficit, you are in a lot weaker position to deal with debt and budget deficits. They are all intertwined in the grand scheme of things.

One last note, RichardPrice you do know what a Knowledge Economy is right?

Yes, and I am also aware that there yet hasnt been a viable economy based around it yet. To have it as a main economy of a country is narrowminded because it isnt sustainable.

Im not being antiUS here (before the usual people pipe up with that comment) but the future US economy is pretty much based on ifs and maybes and is in no way currently viable.

So, how many Bushies think it will go down before Jeb's inauguration...???

Anyone? Anyone? Bueller?

*listens to the crickets*

Heck, it doesnt matter. Does it matter?

Bush isnt worried at all. He's our president.

So why worry?

Ever wonder WHY this doesnt matter to this administration?

Ever wonder WHY theres no attemp to correct this?

Ever wonder WHY?

Originally posted by dgtempe
Heck, it doesnt matter. Does it matter?

Bush isnt worried at all. He's our president.

Ever wonder WHY?

it's because they control the tv body that they don't care. the tv body is unaffected by truth.

666 billion. anyone scared yet? do you think this is accurate, or just rounded off to be apocalyptic. you know, -an illuminati programming trigger, 'they' are always throwing these numbers into media pronouncements.

Jeb is not going to be inaugurated...so listening for those "Crickets" is going to be a long ordeal there, Gazrok.

dgtempe: "Why?" Always a "why".....never a suggested fix? Typical liberal Democrat: complain and spread more 'gloom and doom' and never once provide an adequate alternative to the problem. No wonder Kerry lost, huh?

As for the trade deficit, I'm no economist, but I'll take a growing trade deficit over a growing trade surplus anyday. Bet. The economy is growing, and as such, the trade deficit will expand. Trade deficits indicate growing consumer demand, correct? The also indicate expanding investment opportunities, correct? These may help?

Foreign Trade Statistics
"Bad News" on the Trade Deficit Often Means Good News on the Economy
America's Maligned and Misunderstood Trade Deficit

A coming shift or change in tax policy will help, also.




seekerof

[edit on 16-3-2005 by Seekerof]

Racking up national debts is irrelevant for those who are making out like bandits any way. What do you care about the US economy when youre sipping martinis in the Caymans with billions of newly purchased Euros?

[edit on 16/3/05 by subz]

I agree with Seekerof, this whole Trade Surplus and Foreign Debt issue is being blown way out of proportion by all the 'Neo-Liberals' still sore about the election outcome.
The White House and the Federal Bank both are assuring the public that their is no need for alarm over the Trade Deficit. The claim that the US has become 'unproductive' and is showing signs of 'degenerating' CANNOT be determined by looking at the level of Trade Deficit. It makes no sense in theory or in practice why a nation’s trade deficit should shrink as the overall productivity of its workers rises. An increase in Trade Deficit (to me) [ I'm no economist!!] implies greater consumer confidence in the economy and reflects the confidence of the world on the US economy.
I say confidence of the world on the US economy because Trade deficit in the US today is the gap between Savings and Investment. The investment made to our economy far outweighs our domestic savings. So the variables in the trade-deficit equation are not industrial competitiveness or trade policies, but how much a nation saves and invests. If a nation’s rate of savings rises or if investment falls (as it usually does during a recession), its trade deficit will shrink. Conversely, if savings fall or investment rises (as it typically does during an expansion), the trade deficit will grow.
Lastly, the White House which has under its employee some of the most experienced and seasoned economists understands truly how the economy works and know all the variables that contribute to revitalizing economy, the view shared by many on ATS is contrary to this which is sad.

IAF101

[edit on 16-3-2005 by IAF101]

Well you Republicans can sleep easy in the knowledge that the Bush Co. will share their wealth with you and look after you all when your coughing and spluttering and cant breathe.

You'll be kicking yourselves that you allowed an elite group of rich guys to fleece you of your future and health. Your shortsightedness is part and parcel of being a republican so you both are forgiven.

it's true. the deficit alone isn't a good indicator of degradation of productivity. out sourcing, plant closures, unemployment, etc. all indicate that america's headed down the tubes.
let's do the math...
one $150 pair of nike shoes if made in america, ---applying higher costs for property and labour and regulation compliance makes cost of production twenty five bucks, so only a 300% profit for nike.
one $150 pair of nike shoes made in the far east, ---applying lower costs for brutalisation and exploitation of children, and bribery of officials, makes cost of production about three bucks, for a much healthier profit, AND 'we' are supporting the 'world economy'.

[edit on 16-3-2005 by billybob]

Remember how great life was in the 60's? One parent working, low income taxes, plenty of free time to devote to the family?

Well, in the 60's we had a trade surplus, just like the last 200 years prior. And we had tariffs (TAXES) on imports and exports. And the dollar was worth something. Only in the 70's did we start running deficits. In the 80's we started removing the tariffs. The dollar started its downward spiral.

I am no economist by a long shot but it doesn't take a rocket scientist to figure a trade deficit is bad. I'm sure most 10 year olds would tell you it is bad. What if this was your own budget or your companies budget? How long do you think would last importing more than you export?

And of course, the Trade numbers have no meaning to productivity, that is why productivity numbers are reported separately. The Trade numbers give no indication of how much is being consumed internally.

I really thought with all of the outsourcing going on across the US was the reason for the deficit (and may well be). However all the charts indicate our exports have increased slowly over the years (albeit at a slowing rate). What I don't know is how the exchange rate of the dollar plays into these numbers also.

The trade deficit can not be solved by Alan Greenspan. It also does not ebb and flow - at least from I see in the tables of Trade for the last 45 years.

It is solved when you and I quit buying imported goods and go back to buying American products. I know they are hard to find, but if you start finding them and buying them, it is that much less to import.

So quit throwing the blame at politicians and start changing it yourself.

Our trade deficit stems from several different factors. One of them is the lower dollar due to the amount of deficit spending by the US government along with growing imports of oil. Oil was about $30 per barrel a few short years ago. the dollar headed south by the tune of about %30. that makes the $30 per barrel now $39 per barrel. With growing imports at higher prices equates to around %40f of our trade deficit.

The other factor is China. China is consuming more energy which is also driving up oil prices making our deficit even greater. China has pegged its currency to ours making the products that they produce cheaper than ours no matter what the value of the dollar is. China has kept inflation low but has also helped to remove any priceing power out of the products that American companies are producing. This lowers the export numbers. China in some industries are doing what the Japaneese did called dumping, selling products at below cost to wipe out the competition. China has so many unemployed people that it will take years before their wages start to rise. this also helps to keep prices down. without price leveraging it makes it difficult for business to expand hiring more workers etc...

Untill the problems with China and our energy imports are dealt with we will have a trade deficit.

One other thing is that we have a much greater demand for things then most of the rest of the world that we are attracting goods and sevices at a higher rate then just about anywere else. If there was no such demand for things I would be worried becasue that would mean that we are all broke and cannot afford to buy stuff.

cryptorsa - you are still missing the big picture. Ethiopa has a trade deficit. Do you think it has a strong economy?

A trade deficit means you DID (past tense) have a strong economy. But now more money has just been taken out of circulation for your use, making you and your country poorer. And, that money is going to foreigners, making them richer and stronger. In our case, $666 Billions has been yanked out from under us. When money is taken out of circulation, it is the starting point of a recession. Banks have that much less to lend and corporations have that much less reserve. Think how much stronger our economy would be if we didn't lose $666 Billion. And think how much stronger it would be if that was a $666 billion Surplus added to our economy.

If Ford Motor Company continued to spend more on imports (parts for its vehicles) than exports (vehicles sold) how long will Ford Motor stay in business??? Sure, you could say Ford can quit importing and start producing to stay in business. Well, that is what we need to do.

If a Trade Deficit is so good for us, why did we prosper for 200+ years with a trade surplus???
If a Trade Deficit is so good, why are all other countries striving for a Trade Surplus???

Most importantly, the observation that everything is intertwined. If we look at the vector over the next ten years ( contrary to an earlier poster, we are not leveling off; this is the third record level in a row) carries us into the multi-trillion range. That sort of deficit costs 100's of billions to service annually.
As Buffet said, that's not an ownership society.....that's share cropper society.
US economic outlook, in order to 'grow', would be resting on these shaky foundations:
- international capital inflows
- inflated stock market values
- rising indebtedness, both personal and corporate

Is that any way to grow an economy?

We're flirting with the point of no return on the dollar; investors will eventually decide that the trade deficit has grown too wide, lose confidence in the US dollar, withdraw money ....then we're fooked.
Last time we had a different Executive stewardship at USA Inc., the deficit was 25% lower & the dollar was strong. If we weren't talking the US Dollar, America would have been belly up by now & had an economic implosion like many banana republics.
The scary part? Look up how many bank researchers, think tankers, economists are issuing papers with topics like Confidence in the USA?

Don't worry the economy is growing ha, that is what the administration is telling the regular American, " don't worry we have a faster economy than the rest of the world"

Humm............I though US economy is faster than any other part of the world all the time.

But did bush said anything about our national deficit?

Oh..........."don't worry it will fix it all by itself too" Right?

How about out sourcing? "don't worry it will be fix in no time?

Yeah we don't need to worry a think our pretty heads just needs to believe blindly what our lord said, occurs Jeff will be the next king to the bush dynasty throne

Good post Bout Time. In the 60's we had a surplus of $32 billion. Since then, it's gone down the tubes - $82 billion deficit for the 70's, $850 billion deficit for the 80's, $1045 billion deficit for the 90's, and already $1888 for only 1/2 of this decade.

Does anyone still see this as great for our economy? Do you think it shows our present economy is strong???

What needs to be asked is why do we need to import so much when Americans are unemployed? Why aren't American companies picking up the slack and fulfilling our needs?

Well guess what? Those companies read the forecast years ago and got out while the running was still good.

There is no need to bash any politician or political party. My numbers show that this has been happening under Democrats and Republicans.

We the People are mostly to blame. Buying imported goods to save a dime while our fellow Americans get laid off. Not bothering to worry about where our good were made and what would be the outcome from buying foreign goods. Well now we know. Plant closures, unemployment, worse deficits, worsening economy, etc.

Foreign oil is not near the problem as you think. It's always been there even when we had surplusses. It has always been a minor percentage of the deficit. But what about the other 60 % of our deficit. That's what we need to focus on.