Talking of the US and its politicians, the US trade deficit shrank in March – down to $58.2bn.
It appears the falling dollar is working, although unfortunately for the US, it only worked one way. Imports fell, thanks in part to the falling dollar, but exports fell too; that wasn’t supposed to have happened.
Capital Economics reckons that the recent rises in the price of oil will put an awful lot more on the US trade deficit, indeed, it predicts this deficit could go close to the $67.4bn record set in the middle of 2006.
On the other hand, when oil starts to fall back, which it surely will eventually, then the US trade picture should start improving.
It is more worrying, however, that exports fell. It is too early to tell if this is a trend, so next month’s data will be very interesting.
We have argued before that this belief the global economy can afford to see the US go from a net importer to a net exporter seems a tad hopeful.
The global economy is used to having US consumers as customers, it seems far from certain it can afford to see this change.
But of bigger concern, are the calls from certain US politicians for higher tariffs and other trade barriers.
Insomniacs and writers for Investment and Business News may have heard a recent TV interview with EU commissioner Peter Mandelson, in the middle of the night the other day.
Mandy was very critical of some of the Presidential candidates and their anti-free trade rhetoric.
He didn’t mention names, so you can only guess who he was referring to.
We won’t name names either, but if one of the candidates is successful and SHE implements the policies SHE has referred to, then the resulting impact on global trade really could cause problems.
As ever, the biggest danger with the current economic crisis lies with over-reaction, and in wrongly assigning blame.
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