How the U.S. trade deficit is like Goldilocks
TEXT OF STORY
JEREMY HOBSON: In about a half hour, we’ll find out how big the U.S. trade deficit was in October. The expectation is that Americans didn’t sell all that much more to foreign buyers in October. But we didn’t buy much more either.
Marketplace’s David Gura has the story from Washington.
DAVID GURA: At last check, the trade deficit got smaller. It shrank, to $44 billion. I asked Robert Shapiro, a former undersecretary of Commerce, if that’s good news.
ROBERT SHAPIRO: It’s hard to call it good news, because it mainly comes out of bad news.
He says there are essentially two ways the U.S. can reduce its trade deficit. It can produce more goods Americans wanna buy —
SHAPIRO: The other is to go into a recession. And a recession is the surest way to bring down a trade deficit, because it sharply reduces the purchases of imports.
In other words, Americans are buying fewer goods from abroad. And yet, other countries, like Brazil and China, weren’t as hard hit by the recession, and have continued to grow. Zach Pandl is an economist with Nomura Securities. He says our trade gap is a bit like Goldilocks’ porridge.
ZACH PANDL: In a growing economy, if the trade balance is roughly stable, that’s actually a pretty good outcome.
If it’d been too hot, or too cold, the trade deficit could’ve been an obstacle to economic recovery. For the time being, it looks like it may be just right.
In Washington, I’m David Gura for Marketplace.
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