BBC Pushes the Trade Deficit Myth
Reporting on the unexpected narrowing of the US trade deficit in September 2009, a non-bylined October 9th BBC piece uses the headline “Weak dollar improves US trade gap.”
The BBC headline implies that the shrinking trade deficit is a “good thing” for the US economy. In so doing, the BBC perpetuates the myth that an expanding trade deficit reflects weakness in the US economy, and, by extension, that this weakness is caused by imports. In reality, there is a strong correlation between an expanding US trade deficit and GDP growth, not shrinkage, as US businesses and workers increase their consumption of energy, capital goods and equipment, and finished products. In other words, when the US economy is growing, Americans consume more, and the trade deficit grows. And when the US economy shrinks, so does import consumption, and the deficit narrows. Indeed, the 2009 US trade deficit is projected to be about half as big as in 2008, reflecting one of the most severe economic contractions of the last century.
Thus, for the BBC to say that the US trade deficit “improved” in September 2009 ignores the strong historical relationship between the deficit and US GDP growth.