This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

No Quick Fix for Trade Gap

"Right now we have a voracious appetite and the rest of the world keeps setting the table -- and paying the bill -- for us," he said. "The typical reversal begins with a combination of slower GDP growth, rising interest rates, and a depreciating exchange rate."

Economists estimate that GDP growth will be cut by about half a percentage point in the fourth quarter as a result of the burgeoning deficit. And the economy could take a further hit in 2005.

"The much touted 3.5% GDP forecasts for the U.S. economy in 2005 could be cut down by as much as 0.7% to 0.8%," said Ashraf Laidi, chief currency analyst at MG Financial.

Although the rise in imports recently is likely to raise fears about higher inflation, economists say there's no reason to panic.

"We haven't yet seen a huge feed-through from import prices," noted Matus. "I suspect importers and exporters are squeezing their margins in order to keep price increases from flowing through to the consumer."

Ian Shepherdson, chief economist at High Frequency Economics, said he believes the deficit probably narrowed by as much as $5 billion in December as oil prices declined. Oil imports surged 17.7% in November.

In addition, he said the decline in exports "makes no sense" and was probably affected by "some sort of seasonal adjustment problem."

The trade numbers Wednesday are likely to increase tensions between the U.S. and China. Although the gap with China narrowed for the first time in nine months in November, it still stands at a whopping $147.7 billion for the year.

The U.S. has criticized China for keeping its currency pegged to the dollar. If the Chinese yuan were allowed to float freely, economists say its value would shoot up, making exports from that country more expensive.

While this could help to narrow the trade gap, it also could mean higher U.S. interest rates, as China's central bank has been using the profits from exports to buy government Treasuries.

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,959.44 +154.64 0.87%
S&P 500 2,078.54 +7.89 0.38%
NASDAQ 4,781.4240 +16.0440 0.34%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs