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US Trade Deficit Shrinks to 5 Year Low

Imports in February were stalled by labor negotiations at West Coast ports, bringing the US trade deficit to a more than 5 year low. This comes on the heels of more expensive American exports due to the dollar’s recent strength.

Imports will likely spike when we see a solution to the labor dispute and the holdup can be released. That said, energy imports have declined over the past couple of years, marking a more fundamental source for a shrinking trade deficit.

I wonder if there are any currency implications to the holdup. Does the market recognize that it is temporary? Or, could the due flood of imports ease the dollar’s strength?


  1. moorem15 moorem15

    I read somewhere that another problem facing ports is the increased ship size- off loading these bigger ships takes up more space and port resources and has exacerbated the port situation.

  2. Stephen Moore Stephen Moore

    One of the economic results of an appreciating currency is that it will hurt your trade deficit as your goods become relatively more expensive to other countries. The trade weighted dollar index against other currencies is still under 100 (set to 1973) at 91.14.

  3. Christian von Hassell Christian von Hassell

    I assume that most of the goods shipped in containers are not perishable – but I wonder what other effects the holdup has had on American businesses. Businesses who depend on unique supplies shipped via container freight might be in a tricky situation – surely the coming months and another round of earning reports will shed some light on this question.

  4. Stephen is good to point to the trade-weight exchange rate. There’s also a time lag: imports drop in price quickly, but volumes don’t change. Exports are invoiced in dollars, so no immediate effect there. But export volumes soon fall, and imports then rise, and the trade deficit with it. Jargon: the J-curve.

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