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The U.S. Trade Deficit Just Reached a New High

Image via Flickr by Jason A. Howie

On March 6, 2015, the U.S. Department of Commerce announced that the trade deficit for goods and services has reached $41.8 billion. That’s the highest it has ever been. And, that number is expected to grow because of weak economic growth overseas and a strong dollar. This says a lot about the health of the U.S. and future growth potential. Debt is bad, but growth is good — businesses in the U.S. are trying to find a balance.

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The strength of the dollar is giving Americans buying power overseas. This creates the perfect opportunity for the trade deficit to grow. At the same time, countries overseas, particularly China and Europe, are slowing down which is only strengthening the dollar more. More jobs are being created in the U.S., which is good for the economy. The low price of petroleum is also fueling the trade deficit. U.S. capital goods have seen a steady rise since fuel prices started to drop. This export expansion is fueling the economic strategy in the U.S.

Many people argue that the trade deficit isn’t necessarily a bad thing because it simply means that a country is spending more than they are saving. As long as the investment is yielding stronger growth, things will even out over time. Businesses in the U.S. can be more profitable because of the strong dollar, but the deficit will grow as a result of more exports from overseas.

Right now, borrowing costs and interest rates are low. The Federal Reserve is strategically thinking about the right time to raise them. That’s why the U.S. is taking advantage of the opportunities overseas right now, because they won’t be as profitable as soon as interest rates rise. The trade deficit is growing, but so is the health of the U.S. economy. Businesses in the U.S. have a good opportunity right now. This is creating more jobs. As businesses continue to think this way, the trade deficit will only get bigger and bigger. [/show_to]

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