As the U.S. economy teeters along a recessionary line, it’s interesting to study this month’s latest U.S. trade figures.  Historically, recessions and economic slowdowns have led to a narrowing of the U.S. trade deficit.  In the 1991 recession, for example, the annual U.S. trade deficit fell a whopping $34 billion.

As the latest Commerce Department figures show, the monthly U.S. trade deficit dropped slightly in May, dipping from $60.5 billion to $59.8 billion.  Curiously, though, despite a worried economy and a weakening dollar, the U.S. trade deficit with China rose from $20.2 billion to $21 billion. 

Just what is it about China that makes the U.S. keep racking up huge monthly deficits?

As ManufactureThis is wont to note, China is the world’s most flagrant manipulator of its currency.  While currency rigging is illegal under world trade law, China has continued to artificially depreciate its currency, the Yuan, in order to boost exports.  The result is a growing export surplus with the U.S., even during months when the U.S. trade deficit otherwise takes a dip.

U.S. manufacturers are rightly concerned about China’s cheating.  And they’re not alone.  First the EU and Japan started to speak up.  And then, more recently, the World Trade Organization (WTO) joined calls for a rise in the Yuan.

The bigger hurdle, however, will be to see if Congress and the Administration can jump on the bandwagon and get serious about dealing with China’s cheating.  Until then, ManufactureThis will continue to note, “The monthly U.S. trade deficit with China climbed again…”

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This entry was posted on Friday, July 11th, 2008 at 7:20 pm and is filed under Holding China Accountable, Currency Manipulation. 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.