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</o:shapelayout></xml><![endif]--></head><body lang=EN-US link=blue vlink=purple><div class=WordSection1><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><b><i><span style='font-size:12.0pt;font-family:"Times New Roman","serif";color:gray'>To paraphrase from the 2000 campaign, "It's the ratio, stupid." This is like going on a diet, exercising more, but ignoring the 4000 calories you eat every day from a fast food restaurant.<o:p></o:p></span></i></b></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><b><span style='font-size:18.0pt;font-family:"Times New Roman","serif"'>Trade Deficit Widens as Exports Fail to Drive Recovery<o:p></o:p></span></b></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'>July 19, 2010<o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'>News of US trade figures for May surprised the markets but should they have? The US trade deficit, <b>the [negative] difference between exports and imports, increased 4.8% to $42.3 billion in May</b>, a Wall Street Journal <a href="http://online.wsj.com/article/SB10001424052748704518904575364740801254292.html?mod=dist_smartbrief"><span style='color:blue'>article</span></a> reported the Commerce Department as saying last week. That was the widest since November 2008. April’s trade gap was also revised upward from earlier estimates. The Commerce Department reported US exports grew 2.4% to a 20-month high of $152.3 billion on the back of higher sales of heavy machinery, medical equipment, power generation and commercial planes an Associated Press <a href="http://www.google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9GUDD8G0"><span style='color:blue'>article</span></a> said. <b><span style='color:red'>Imports however grew faster still, expanding 2.9% to $194.5 billion.</span></b> The US trade deficit with China, America’s largest overseas trading partner (Canada is its largest trading partner), expanded to $22.3 billion in May. This is the widest level since October and 15% higher than the previous month. Imports expanded by $3.1 billion, far outpacing a $162 million gain in exports.<o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'>But the US has been on a long-term trend of rising deficits interrupted briefly by the financial crisis of 2008/9 and although many had been hoping the slide in the value of the dollar would result in an export driven recovery the reality is major export markets in Europe and Japan have been equally depressed and hence not ready-made markets for US goods. It was probably naive to expect US exports to lead the recovery any more than a weak pound has resulted in an export led recovery for the UK. The reality is both markets suffer from long-term structural problems of debt and lack of competitiveness. Many point to currency manipulation as one reason why the US will not be able to right the balance with China but the $22.3bn deficit with China is only part (admittedly a large part) of a wider $42.3bn deficit with the world at large.<o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'> . . . Scott Paul, executive director of the American Alliance for Manufacturing is quoted as saying, “The widening trade deficit is not only an alarming trend, but also represents wealth and jobs heading overseas.” His organization will not be alone in calling for a tougher line to be taken with China in particular as this recession drags on and the long awaited recovery proves slow to come.<o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'>–Stuart Burns<o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><a href="http://agmetalminer.com/2010/07/19/trade-deficit-widens-as-exports-fail-to-drive-recovery/">http://agmetalminer.com/2010/07/19/trade-deficit-widens-as-exports-fail-to-drive-recovery/</a> <o:p></o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></p><p class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt:auto'><span style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></p><p class=MsoNormal><span style='font-size:12.0pt'><o:p> </o:p></span></p></div></body></html>