Friday, February 11, 2011

Trade deficit soars! All because of one good we buy...No, it is not Happy Meal Toys, although that is a problem...

In the news you will hear about the US's record trade deficit.  Trade deficits occur when Net Exports (N(x)) are negative.  To find Net Exports take Exports and subtract Imports.  The US imports more than we export. This graph shows the change by month.  Exports are in Blue and Imports are in Red.
Calculated Risk
(HT: Calculated Risk) The Department of Commerce reports the following:
[T]otal December exports of $163.0 billion and imports of $203.5 billion resulted in a goods and services deficit of $40.6 billion, up from $38.3 billion in November, revised. December exports were $2.8 billion more than November exports of $160.1 billion. December imports were $5.1 billion more than November imports of $198.5 billion.

 For December our trade deficit was $40.6 billion. Look at this number more closely in the context of the graph below.  If oil imports are factored OUT  we see a dramatic decline in the trade deficit.  This is useful so we can see how much of the deficit is driven by ONE commodity and shows our dependency on foreign sources of oil. The very top line '$0" would represent balance trade--exports =imports. The Blue line represents the TOTAL trade deficit and the Red Line shows the trade deficit WITHOUT imported oil included. 


Calculated Risk
 The trade deficit in oil is a little over 50% of the deficit!  Can you guess where just about ALL of the remaining imports in the trade deficit come from?  That was too easy...I am not even going to post the answer.
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