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A Good News Stat: The Non-Oil Trade Deficit

Posted by: Michael Mandel on August 12

I’ve been fairly grumpy this past week, dissing the employment and the productivity stats. But this morning I saw a number that I liked: The non-oil trade deficit, which shrunk to about $20 billion in June.


Why is the nonoil trade deficit important? To my mind, the financial crisis was not truly over as long as the U.S. was borrowing hundreds of billions from the rest of the world to pay for imports. That is, if the crisis was about too much debt, adding on more debt can’t be a good thing.

There’s really nothing we can do about our oil imports in the short run. But it should be possible to bring down the nonoil deficit further. How far? A lot more, I think. I don’t know if zero is possible, but given the depth of the downturn, it would be good to get as close to that as we can.

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Reader Comments


August 12, 2009 02:46 PM

Actually, the GDP growth rates for China and India bounced back to pre-recession levels very quickly, even while US non-oil trade deficit is shrinking.

This is good news for the global economy, since China can now sustain high GDP growth without extreme reliance on exports to the US. High GDP growth in China kept the world out of a depression by keeping a floor on commodity prices and mopping up other inventories.


August 12, 2009 03:24 PM

How much of that trade deficit is in services? That should be the easiest cut.


August 12, 2009 08:17 PM

I was under the impression we still ran a minor surplus in services. But I'm glad to hear the deficit is somewhat reduced: it's an important measurement of whether, on average, we're living within our means.


August 12, 2009 10:33 PM

If we switched our fuel base from oil to natural gas we could make for progress as we have a huge abundance of natural gas in newly exploited shale formations in Texas, LA and PA.


August 13, 2009 10:32 AM

Kudos, Michael, you called the bottom of the trade deficit in January, 2007. I don't find the news all that good, though, since I think it is mostly a result of soft demand and an inordinately strong dollar, rather than any balancing by exports.

To commenter Mike about the abundance of domestic natural gas: Explain why new Liquified Natural Gas regasification terminals for importing gas keep coming on line.

Keith G

August 13, 2009 03:01 PM

A week dollar should help non-oil trade deficit. I think there has been a slow change away from off-shoring as the dollar has depreciated and the Yuan has strengthened. In my business we have pulled most of our products out of China and back home as shipping costs and inventory costs outweighed China's EXW pricing.

Regarding oil, this past recession feels a lot like '81. The oil spike then caused a shift in vehicle purchases and engine technology and the average fuel economy shot-up (even on big SUVs). Oil became a smaller component compared to our GDP. Electric cars, natural gas, nuclear, wind, sun, and even some coal could have an even bigger impact than in the 80's. The public's appetite for green seems much greater now than then. Also, the technology seems to be more developed as well. I think our trade deficit will shrink over time as this happens.

Joe Cushing

August 14, 2009 06:00 PM


I believe Mike is talking about new Natural Gas that has yet to be developed. I heard that we have centuries worth or something like that.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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