The USA’s trade deficit is collapsing at the fastest rate on record, a testament to the ability of a worldwide recession to sharply reduce global economic imbalances that had grown to unprecedented size. The United States estimated this week that the trade deficit, as a percent of GDP fell to 2.4% in Y 2009 Q-1, the smallest deficit in a decade. Declining trade deficits in the United States are likely to be matched by falling trade surpluses in countries that have historically been net exporters. That is one reason Germany’s economy appears to be slowing and China has embarked on a huge economic stimulus program of its own that appears to be working. The shrinking trade deficit is not being caused by a rebound in American exports. They are falling as well, but not nearly as much as imports are declining.
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