US Trade Data May Cause More Business Imbalances in European Markets
The US trade data is a contradiction to the common American sentiment. We love our country and we want to do well in it. For decades, US data have always been smaller than those of other developed countries. Now that US trade data is finally out in the open, we see that US data are now smaller than virtually any other country in the world. Why is this?
The growth of dollar with the trade data
Many believe that lower import bills, or the low growth of the dollar as a consequence of the trade data, is the reason why US trade figures have not shown improvement. This is simply not true. To be fair to the American people, there are many who indulge in a campaign of propaganda about the importance of free trade and the advantages of keeping the dollar strong. These people have never bought into the fact that a stronger dollar would help keep their living standards up, even after the benefits of lower import tariffs and trade liberalization. In fact, they never could have conceived of the idea themselves.
Free trade does not just mean cheaper goods and services. It also means better access to raw materials, cheaper transport costs, and more opportunities for domestically manufactured goods and services. It is not the cheap products of foreign producers that are the secret to economic success - it is what they do with the products once they get here. And this has everything to do with domestic assets. More foreign direct investment (DDR) leads to more domestic production, and this leads to more exports and imports, all of which further boosts domestic asset values.
The help of US trade data in domestic resources
As a result, a US trade data now means less foreign direct investment, and that translates to fewer domestic resources. More foreign direct investment means more opportunities for exports, which in turn leads to more imports. That's why exports have historically been the driving force behind US economic growth. Exports account for about two-thirds of the gross domestic product.
But if the current trend continues, the US government will be faced with increasingly difficult challenges when it comes to trying to balance the books. The recent news reports have only reinforced this view. For instance, the European Commission's vice president said recently that Europe needs the US on its side more than ever as a reliable trading partner. And the European Union's chief negotiator said recently that the EU will begin negotiating its own bilateral trade agreements after the US begins talks with its trading partners on bilateral free trade agreements.
The European Commission believes that the US should be cooperative in its approach to reducing its trade datas with its trading partners. It has therefore launched an investigation into the reasons for the US' trade data. In particular, Commission officials are looking into the role that the European Union and Japan to play in the reduction of the US' current data with its trading partners. The results of this study are expected to be released later this year. Meanwhile, the Commission's investigation into the impact of the Japanese yen depreciation on the US economy should be concluded by the end of this summer. One can easily buy the US trade data from some of the reliable sources like importkey.com.