Chart of the Day

Today, the Commerce Department reported that the U.S. trade deficit widened to a record $66.11 billion. Today's chart helps explain why. For one, despite the fact that China removed the 8.28 yuan to the dollar peg back in July, the change was not all that significant (see bottom chart) and the US-China trade imbalance has soared to a record $20.1 billion. It is also interesting to note that since 9-11, the trade imbalance with OPEC has followed a similar path to that with China. This provides some evidence that China's rapid economic build-up has impacted global demand for oil and with it oil prices. While there are many other factors that are impacting the US trade imbalance (i.e. NAFTA, Hurricane Katrina, Boeing strike, etc.), China's currency manipulation along with the subsequent increased demand for oil explain a significant portion of that $66.11 billion trade deficit.