America's growing trade deficit: 4 theories

The gap between U.S. imports and exports widened more than anticipated in June, signaling trouble for the recovery. What's going on?

Economists now think American factories produced fewer goods than previously estimated in the first half of the year.
(Image credit: Corbis)

America's trade deficit with the rest of the world unexpectedly widened to $50 billion in June — the highest it has been since the economic crisis began in late 2008 — causing many analysts to fear that the U.S. recovery may be sputtering out. "It just seems like the economy is losing momentum as the year progresses," said Kevin Cummins, an economist at UBS. (Watch a discussion about the U.S. government's opposing view.) Here, 4 theories on why the trade deficit surged:

1. China's unfair advantage: The trade imbalance worsened with a lot of partners, say the editors of The Economist, but the most striking change was the $4 billion rise in imports from China from May to June. Beijing needs to keep its economy growing, so it can't afford to adjust its undervalued currency — meaning that American money, and jobs, will continue flowing to China. As long as the yuan remains artificially cheap, the U.S. recovery will look "ever weaker."

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