How the U.S. Economy and Jobs Are Being Held Back by the Trade Deficit

NEW YORK (TheStreet) -- Here’s one way to jump-start the struggling U.S. economy and create more jobs: Cut the trade deficit.

On Tuesday, the Commerce Department is expected to report the March deficit on international trade in goods and services was $42 billion, up from $37.8 billion in February.

Trade with Japan, Germany, South Korea, and China account for most of the trade imbalance, and their monetary and exchange-rate policies pose a significant barrier to U.S. growth.

Since last summer, the dollar has strengthened about 15%, making U.S. exports more expensive abroad and imports cheaper on U.S. store shelves. In the first quarter alone, the trade deficit subtracted 1.25 percentage points from gross-domestic-product growth, or about $220 billion.

Japan and Germany, through the European Central Bank, have pursued aggressive monetary policies with the intent of cheapening their currencies to boost exports and increase domestic employment.

South Korea prints won and purchases dollars in foreign-exchange markets to keep its currency inexpensive against the dollar, and boost sales of Samsung (SSNLF) phones and Kia Motors (KIMTF) automobiles in U.S. markets.

China limits inward foreign investment; for example, foreign manufacturers in autos and other industries must limit investments to about 50% ownership in joint ventures with domestic partners. That substantially curtails capital inflows and reduces the market value of the yuan. And that is something international organizations such as the International Monetary Fund fail to consider in assessments of China's exchange-rate policies.

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