Annual figures for the 2007 U.S. trade deficit in goods and services were released today by the Commerce Department—to little public fanfare.  But the hundreds of billions of dollars in net foreign purchasing by U.S. consumers last year will have heavy repercussions.

  Thanks to a slowing economy and weakening dollar, the overall trade deficit fell somewhat from 2006’s record $758 billion.  But the $711 billion deficit racked up in 2007 represents “many thousands of U.S. factories closed and workers laid-off,” according to AAM Deputy Director Horace Cooper. 

The trade deficit set escalating records over the past five years and, as Cooper further noted, the “more than 3.3 million good paying manufacturing jobs we’ve lost since 2000 suggest that huge, ongoing trade deficits do not make for a more prosperous America.”

Of particular note, more than half of the roughly $500 billion U.S. trade deficit in goods in 2007 is with China.  The U.S. clocked a record $256 billion trade deficit with China, which, as Cooper emphasized, underscores the “need for legislation addressing both illegal currency manipulation and unsafe imports.”

Moreover, the cumulative U.S. trade deficit with China in manufactured goods has reached $1.1 trillion since Beijing joined the World Trade Organization (WTO) in December 2001. 

Some will point to a 6% reduction in the annual trade deficit as encouraging news.  Unfortunately, similar declines have been noted when the U.S. tips into recession.  From 1990 to 1991, the annual trade deficit fell from $111 billion to $76 billion.  And in 2001, the deficit fell to $429 billion from a previous record of $454 billion.

These drop-offs tell us that, in tight times, the U.S. economy finds it even harder to sustain its pattern of overconsumption and net borrowing from the rest of the world.

It remains to be seen how the U.S. will fare during a new recession that seems all but inevitable.  Continuing to allow good-paying manufacturing jobs to travel overseas, however, is not a recipe for success.

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This entry was posted on Thursday, February 14th, 2008 at 6:07 pm and is filed under Economic Security. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.