The Trade Deficit 2004

Brad Setser has an excellent Post today at his blog:
http://www.roubiniglobal.com/setser/

He basically asserts that the Trade Deficit will get no better in 2005.

The Associated Press has a series of articles today of interest, from which can be culled many choice items:

The U.S. trade deficit soared to a record of $617.7 billion last year as Americans' appetite for all things foreign, from crude oil to cars, hit all-time highs

For all of 2004, U.S. exports of goods and services rose 12.3 percent to $1.15 trillion. But imports rose at an even faster clip of 16.3 percent, setting a new record of $1.76 trillion.

The demand for foreign goods was led by a 35.7 percent surge in foreign petroleum imports

The deficit with China was up 30.5 percent from the previous record for any country, a deficit of $124.1 billion with China set in 2003. The United States also saw large increases in the deficits with Japan, at $75.2 billion, Canada at $65.8 billion and the 25-nation European Union, where the deficit rose to $110 billion.

In its monthly report, the International Energy Agency raised its estimate of 2005 oil demand growth by 80,000 barrels a day, bringing its forecast for average daily demand to about 84 million barrels a day. The IEA, a Paris-based watchdog for the Organization for Economic Cooperation and Development, attributed the revision to stronger demand from China and other Asian countries not part of the OECD.

China should keep up its strong economic expansion over the next five years, with annual growth of 8 percent driven by abundant labor and a big domestic market, the government said Thursday
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It is time to restrain the American Consumer, not least of whom is the Federal Government. The best would be a 10% Import Sales Tax, which would curb American desire to consume at the source. A Foreign Exchange Bank has previously been commented on, regulating the flow of Dollars Overseas so that actual equivalent value is maintained. Economic restriction could be emplaced: an appropriate Ton-mile charge for Transportation of Product on American roadway could be assessed. All would raise the Cost of American consumption of foreign product, while the last would help curtail the use of foreign Oil.

China's planned growth rate is predicated upon sale of their Product in American markets. They are unlikely to properly value the Yuan, as it props the Sales volume of Chinese products in foreign markets. We need to implement a U.S. Foreign Exchange Bank in reponse. A loose estimate by this Author states We are funding Chinese economic growth twice: once through provision of Dollars for Chinese purchase of Oil, and secondly, through the payment of artifically high Import prices for Oil in competition with China. It says the actual Cost of these foreign Imports are about 22% higher than the listed Retail price, but paid through higher Oil prices and Unemployment Benefits. This is all at the cost of the American Standard of Living. lgl