A better-than-expected further decline in the United States trade deficit has brought euphoria into North America’s leading financial districts. The April figure of $9.89 billion compared to March’s $11.70 billion was the lowest in three years. Within minutes of that Washington release, Wall Street’s Dow-Jones index advanced a respectable 36.62 points to its highest level since the October crash.
Too, the timing couldn’t have been better, for this rather dramatic narrowing in Washington’s trade gap is sure to give leaders of the seven main industrial democracies a glow of satisfaction when they gather at the big Economic Summit meeting here in Toronto this week.
Certainly this is a favorable development. But let’s look a little deeper as to the cause.
In this same period, prospering little Taiwan raised its gold reserves to a record high of 12.3 million ounces worth $4.8 billion, up over a million ounces in the month. Not a gold producing country, most of that was imported from the United States because Taiwan wanted to reduce its trade surplus with that country, which is its largest trading partner.
It is largely these substantial gold imports that have been reducing Taiwan’s almost embarrassing trade surpluses with the Americans — to $2.58 billion from $4.98 billion in the first four months compared to the same period last year.
But Washington has been complaining that these gold imports are only “artificially” reducing that country’s trade surplus. By the same token , though, isn’t Washington’s export of its precious gold hoard only artificially reducing its trade deficit?
Next month’s trade figures should be interesting, for Taiwan’s central bank says it will reduce its gold imports from the U.S.
Losing gold may prove a costly way of reducing one’s trade deficit.
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