Bad Economy Good For A Lower Trade Deficit

Demand for imported goods is way down.

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We've heard speculation that the U.S. trade deficit is a big problem that maybe even led to the recession. But if you really want to reduce the trade deficit, the last year has shown that recessions are a very effective way to balance things out. As unemployment is rising and retail spending is falling, the trade deficit has hit its lowest level in nine years:

The Commerce Department said Friday the deficit narrowed to $26 billion, a drop of 9.8 percent from April and the lowest level since November 1999. Economists expected the deficit to widen to $30.2 billion in May.

This is not to say that a large trade deficit is a good thing. What's clear, however, is that even though we hear about so much, the size of the trade deficit one way or the other really tells us very little about the health of the economy.