Rising trade deficit devalues U.S. dollar

The rude awakening Americans faced through the attack of Sept. 11 came after years of building tensions. Similarly, the building trade deficit has been quietly causing problems, which are now becoming so large it is increasingly hard to ignore them.

According to a report by the Commerce Department, the United States trade deficit reached a new record high in February, clocking in at $61 billion. It had been the third time in a row such a monthly record had been set.

While the report stated that imports had increased to $161.5 billion, $2.6 billion more than in January, a detailed analysis by The New York Times showed exports remaining largely the same.

Essentially, the United States is buying more than it is selling, creating a trade deficit.

The Times summed up one of the reasons for the deficit as “leading currencies like the euro, and the Canadian dollar” putting strains on the credibility of the U.S. dollar as a world currency.

Several years ago such a statement would have raised nothing but roaring laughter from economists. Today it garners somber nods, as it is a harsh reality America needs to face.

The reason why Americans have not realized this change is that until now they have only seen the positive side of the trade deficit. Prices for items, ranging from textiles to computers, have steadily fallen, largely perceived as a good thing for consumers.

But since most of these products are now imported, be it by huge chains such as Wal-Mart or “mom and pop stores” trying to widen their profit margin by a few cents, the manufacturing jobs are shipped abroad.

Increasingly it is not only manufacturing that is outsourced. The playing field has been leveled so much that nations such as India are now offering services to Americans — often without Americans noticing.

There is probably no quick fix for this problem. To go against the trend Americans will have to realize that while a shirt may be a few cents cheaper if it was made abroad, it ends up costing some Americans their jobs.

But for consumers to make conscious decisions they will have to be familiar with the facts. Unless they are educated the trade deficit will keep growing.