The U.S. trade deficit now exceeds 6% of GDP and "is weighing down economic growth," asserts Peter Morici, a professor at the University of Maryland's Smith School of Business in College Park. "Although petroleum plays a key role, it is certainly not the whole story," contends Morici.
"The Wal-Mart effect is broadly apparent. The January trade deficit with China was $17.9 billion, up from $16.3 billion in December," says Morici, who says the situation will get worse in the months ahead because the U.S. dollar remains "at least 40% overvalued" against China's currency. "The overvalued dollar will contribute mightily to the U.S. trade deficit until the Bush Administration takes decisive action," he contends.
The U.S. goods and services trade deficit with China and the rest of the world was $68.5 billion in January, as U.S. imports worth $182.9 billion more than offset exports of $114.4 billion, the U.S. Commerce Department reported on March 9. The U.S. deficit with China was the largest with any other single country, roughly twice as big as the $8.9 billion trade deficit with Canada, the second largest.