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Stronger dollar sees US trade deficit widen


The rising value of the dollar has really started to hurt the trade deficit in the United States. The deficit rose by 14% in the 4th quarter of 2015 and has continued to increase in 2015. This trade deficit is more of a problem because of the relatively weaker value of currencies in Asia and Europe. I thought it was interesting to note how the article mentions that political questions have been raised about Asian and European countries intentionally depreciating their own currencies to gain a competitive advantage. Regardless, it is hard for the recovery process to take place in our economy if we are continuing to import more than we export. It will be interesting to see if an increase in the interest rate will start to hurt the dollar and help bring the deficit back down.


  1. Why the stronger dollar? What of US savings-investment balances? What has happened to (S-I) as growth has continued? What has happened to (T-G)?

    How large is the change in the trade deficit relative to GDP? [The detailed BEA National Income and Product Accounts have the information; I’ve not looked in FRED.]

  2. Stephen Moore Stephen Moore

    A stronger dollar relative to other currencies will hurt exports as American goods become more expensive, thus increasing the trade deficit. I wonder what the increase in the trade deficit in the year to date has been, considering the incredible streak the dollar has had relative to the Euro.

  3. winn winn

    Its also interesting to note that American companies in foreign countries are adversely affected as well. Since U.S. companies with an international presence collect revenues in other currencies, converting them to the dollar is more costly — if these companies attempt to compensate for the value disparity, it is likely to decrease demand and sales.

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