When it comes to America’s nettlesome and growing trade deficit, leaders on all sides of the world share a single view: Don’t rock the boat.
With foreign car nameplates and high-tech consumer items from Asia flooding markets here, there are calls that steps must be taken to slow the tide of imports.
Critics note that the huge gap between what this nation buys and what it sells means that the United States must attract two-thirds of a trillion dollars annually in foreign invesment.
Unfortunately, any change in policy could have a devastating effect in other lands. Slaking Americans’ thirst for cheap imports could slow overseas economies at a time when Germany and Japan, in particular, are struggling.
That brings us to Tuesday’s report on the trade shortfall for February. Economists expect it to show little or no improvement from the $58.3 billion gap in January.
In the view of economist Gail Fosler, Americans might as well resign themselves to the trade situation, because meaningful change is unlikely.
“U.S. imports have always been greater than exports, whether the dollar is high or low or whether there is a federal budget surplus or a deficit,” said Fosler, of the Conference Board in New York.
She is in the camp that believes trying to fix the trade situation will take additional time.
“Trade is like a card game against the house,” Fosler added. “Either you are in or you are out. But no matter your skill, it is very difficult to walk away with big winnings on a consistent basis.”
Although March dawned dreary and wet in much of the land, the nation’s merchants saw sales brighten in the month’s final weeks, thanks in part to an early Easter. Auto dealers also saw volumes accelerate, after being stuck in the mud during the year’s first two months.
Economist Brian Wesbury expects Wednesday’s report of March retail sales to show a gain of 0.7 percent, or when car sales are excluded, 0.6 percent.
“Despite the high price of energy, consumer spending showed the strongest gains in three months,” said Wesbury, of Claymore Advisors in Lisle, Ill.
Although apparel sales were dampened by the month’s gloomy weather, all other areas of consumer outlays remained strong, he said.
His bottom line: “We are seeing that, for now, the economy can absorb not only higher energy prices but, in the months ahead, higher interest rates from the Federal Reserve.”
Lukewarm price advances in the stock market seem to be saying that corporate profits are slowing and that companies will be spending less money on capital equipment in the months ahead, notably computer gear.
That may explain why the technology-dependent Nasdaq composite index has fallen about 8 percent since the beginning of this year. Revenues for semiconductor makers, in particular, is expected to slip in 2005, even though the industry will sell a few more chips than last year.
Investor Fred Gordon, who for many years wrote an investment letter in Northbrook, Ill., says the market has been fixated on the price of oil and that Wall Street has been unduly pessimistic.
“It’s like that old Johnny Mercer tune: It’s time to accentuate the positive,” said Gordon. “If oil prices retreat, which is hardly out of the question, it would serve as the catalyst for an important up move for the market.”
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AP-NY-04-08-05 1611EDT
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