The US Trade Deficit Narrowed, But is the Harmful Trend Still Intact?

This morning’s headlines have Americans thinking we’re slowing getting off the tit of import mania. But are we?

Although the Commerce Department says the trade deficit narrowed to $44.0 billion from upward revised $46.5 billion in August, this chart shows the trend continues in the wrong direction:

This chart clearly shows our trade balance quietly adjusting back to the pre-crisis norm. To use a sports analogy, this is like the US (SPY) giving China (FXI) LeBron James and the rest of the basketball Olympians in exchange for mediocre Chinese players, then wondering why they keep kicking our asses on the court.

(Bonus: Is China Building the New-and-Improved Global Empire? >>)

If we really want to drill down to the heart of the problem, we can sum it up in two categories of goods: petroleum, and cheap crap. This chart shows the US sends crippling amounts of wealth to China and the Middle East:

Now, if we could just balance our trade as well as we balance our deficits …

All sarcasm aside, if the US is truly serious about fixing the economy for the long-run, we need to focus our entrepreneurial and patriotic spirits on guaranteeing a near equal amount of wealth is transferred to us from our trading parters. If our future trade policy does not have a net neutral effect (or better) on our national wealth, our children are certain to live in a world where their standard of living depends on fiscally stronger countries.

Don’t Miss: QE2, Global Trade Imbalance and Currency Manipulation >>