South-Western College Publishing - Economics  
Future Bright For U.S. Exports?
Topic International Trade
Key Words Exports and Value of the Dollar
Full Article

If you have an InfoTrac or BCRC access code, click on the appropriate source to login and view the full text article.
Reference ID: A166342180

News Story Even with a growing trade gap in May, economic analysts report that the underlying fundamentals of trade remain unchanged and they seem to point to a narrowing of the trade imbalance of America with the rest of the world.

The import-export gap for the U.S. grew at 2.3 percent in May, but it was slower than a year before. Imports surpassed exports by $295 billion for the first five months of 2007, compared to a difference of $317.8 billion for the same period in 2006. Analysts cite a weaker dollar and growing overseas economies for the improvement.

As the dollar weakens against foreign currencies such as the euro, American exports become cheaper and European countries buy more American goods and services. “The trend is clear,” said Ian Shepherdson, chief United States economist for High Frequency Economics. “This is a substantially improved environment now and for the foreseeable future. I’d hesitate to say we’d return to a trade surplus, but I think over the next few year, it will reduce.

Growing overseas economies are also providing relief to the U.S. trade imbalance. As the overseas economies experience economic growth it produces demand for American goods and services. On the other side of that coin is slower growth in the U.S. which will translate into a slower demand for foreign imports.

“This all bodes well ultimately for U.S. manufacturers,” said Richard Yamarone, chief economist with Argus Research. “We have global economic activity on the rise, and we have a weak American dollar. So now we’re the attraction. And I think that’s going to boost manufacturing activity.”

One spoiler in the equation may be China. In a recent research report, Joel L. Naroff, president of Naroff Economic Advisors, wrote “While sales to China are up somewhat, imports are increasing faster. As a consequence, for the first five months of the year, the deficit with China has increased by nearly 17 percent.”

Discussion Questions:
1. Briefly discuss how a weaker dollar will improve the U.S. trade gap.
2. Discuss how a tariff on imported goods makes the import more expensive and supports a higher level of sales for domestic production of the same good.
Multiple Choice/True False Questions:
1. As the dollar falls against foreign currencies, American goods become cheaper.
  1. True
  2. False
2. Stronger foreign economies will help the U.S. reduce its trade deficit.
  1. True
  2. False
Source Jeremy Peters, “Trade Deficit Rose in May, but the Pace Was Slower,” The New York Times Online, July 13, 2007.
Instructor Discussion Notes Discussion Notes
These notes are restricted to qualified instructors only. Register for free!

Return to the International Trade Index

©1998-2006  South-Western.  All Rights Reserved   webmaster  |  DISCLAIMER