China and USA exports and imports have been dropping sharply. The USA has decreased the excess consumption over production by $20 billion a month (from $60B to $40B monthly deficit). China maintains a trade surplus and as imports drop faster than export this is actually increasing on a percentage basis.
Can the improvement in the US trade balance continue?
The US trade deficit — which is a good proxy for the current account balance (the income surplus offsets a transfers deficit) — is now around $40b a month. At its peak it was more like around $60b a month. That implies, if nothing changes, the 2009 current account deficit would be around $500b, down from a peak of $700b.
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Deficits and surpluses are shrinking globally now that the price of oil is at levels that roughly cover the oil exporters imports.* Right now China’s (growing) surplus is clearly the main counterpart to the United States’ (shrinking) deficit.
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Deficits and surpluses are shrinking globally now that the price of oil is at levels that roughly cover the oil exporters imports.* Right now China’s (growing) surplus is clearly the main counterpart to the United States’ (shrinking) deficit.
It is hard to put lipstick on a pig (or even an ox):
The sharp fall in China’s exports (down 17.5% y/y) and imports (down 43% y/y) shouldn’t have been a complete surprise. Korean and Taiwanese exports are down far more than China’s exports, in large part because of sharp falls in their exports to China. And, given the intra-Asian supply chain, that has long augered bad news for China.
Related: The Budget Deficit, the Current Account Deficit and the Saving Deficit – Top 12 Manufacturing Countries in 2007 – Personal Saving and Personal Debt in the USA – Charge It to My Kids
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