Economy
4:23 pm
Tue June 4, 2013

How Is The U.S. Trade Deficit Affecting American Business?

Originally published on Tue June 4, 2013 5:22 pm

Transcript

AUDIE CORNISH, HOST:

The trade balance between the U.S. and the rest of the world widened by several billion dollars in April, according to figures released today. It was a great month for the U.S. exporters selling artwork and diamonds around the globe, not so hot for American sales of soybeans or computers. Adam Davidson of NPR's Planet Money team has been looking at the numbers, and Adam, what do they say?

ADAM DAVIDSON, BYLINE: Well, overall the whole picture is not that great. The trade deficit grew to $40 billion in April. That's about 10 percent more than it was the month before. Meaning, collectively, we Americans by about $40 billion worth of stuff from the rest of the world more than they buy from us.

Now, this is nowhere near the worst it's been. Before the financial crisis, there was a long time there where the trade mounts was regularly in the high 50s and the $60 billion a month, which was a serious problem - something that the government really needed to address. So we're not there but the numbers keep rising. And it's making people nervous in a lot of industries, although other industries are doing particularly well. This isn't a blanket negative for everybody.

CORNISH: Right, we mentioned artwork and diamonds doing well this month. But what else has the U.S. been exporting successfully?

DAVIDSON: The stuff we seem to be doing the best in is really big, really expensive, really technical things. So we do very well with industrial equipment. We do well with telecommunications gear on an industrial scale, you know, cell phone towers, that sort of thing.

I often hear this idea: We don't make anything anymore in America; we just don't have any manufacturing. That's not true at all. We're comparable to China in the dollar value of the goods we manufacture. It's just we really specialize in more unique, high-value items, whereas we import a lot of the more commodity, cheap stuff we buy. So in April, we imported $7 billion worth of cell phones, seven and a half billion dollars worth of apparel, two and a half billion dollars in toys.

So, broadly speaking, export a lot of big and expensive stuff, import a lot of cheap stuff. But we import a lot more than we export

CORNISH: So I mean how big a deal is this? I mean how bad a problem is that?

DAVIDSON: In any given month or even really any given decade, it's not that big a deal to have a trade deficit. We've had one for, you know, going on 30 years now. Where economists are getting worried is when the numbers get way too high and where it lasts way too long. So we were in a real problem in 2006. Things are creeping up again and it's definitely an issue we need to address over the long-term but not a reason to panic right now.

CORNISH: But what would make the trade balance more balanced? I mean, how can that U.S. turn things around?

DAVIDSON: So there's not much you can do in the short run. I mean, the really - the tools are pretty violent ones. You can launch a trade war. You can raise tariffs really high on imports from big exporters, like China and Germany. But I'd say economists generally don't agree on anything but the one thing they seem to really agree on is that a trade war is a really bad thing and it hurts all the countries involved.

So in the short-term there's not much we can do that wouldn't hurt us more than not doing anything at all. But over the long-term is a lot you can do and it's a lot of just basic good government stuff, you know, improve our educational system. Make sure that the largest number possible of Americans are getting the education and skills they need to be competitive workers in a global economy, who are making products and services the rest of the world wants.

This is going to be a generational challenge. We're going to be hearing about this trade deficit for a long time to come.

CORNISH: Adam, thank you.

DAVIDSON: Thank you, Audie.

CORNISH: That's Adam Davidson from NPR's Planet Money team. Transcript provided by NPR, Copyright NPR.