Hedged In's  Instablog

From Floyd Norris in the NYT:

The United States estimated this week that the trade deficit, as a percent of gross domestic product, fell to 2.4 percent in the first quarter of this year.

That is the smallest deficit in a decade, as can be seen in the accompanying chart. It is less than half of the deficit shown in the first quarter of 2008, when the American recession was new and not yet devastating other economies... what appears to be happening is that much of the pain from the fall in American consumption is being felt in other countries, since exporters in those countries supplied the products that Americans are no longer buying.

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 faltering badly and China has embarked on a huge economic stimulus program.

Quick comment: Emerging markets have rebounded more than US stock indexes since the lows. Yet the economic impact of the US recession could be felt strongest in emerging markets.