What to Look for in Next Week’s Release of U.S. Trade Statistics

Bryan Riley / February 03, 2011

On February 11, the U.S. Department of Commerce will release our country’s 2010 trade statistics. The following three principles will help in understanding what the numbers mean:

1. Unlike the U.S. budget deficit, the size of the trade deficit does not matter. The trade deficit results from people in other countries spending more dollars investing in our economy than buying U.S.-made goods and services. Every dollar spent by someone in another country to buy U.S. Treasury bonds, purchase stock in a U.S. company, or build a new factory in the United States ultimately adds a dollar to the U.S. trade deficit. Americans benefit whether someone in another country buys a $30,000 Ford Explorer or $30,000 of Ford stock. The first transaction results in a lower trade deficit, and the second results in a higher trade deficit. But that does not mean the first transaction is good and the second is bad. (more…)