Trade Deficits/Surpluses Around The World

How will other currencies be affected should the dollar collapse due to its horrible fundamentals? The answer to this question depends on a nation's reliance on the dollar reserves to finance a deficit in its trade balance.

Macro factors for 2009

Due to global slowdown, many nations who might otherwise have been running surpluses will instead be running trade deficits this year:

1) Global demand for raw materials will remain depressed until 2010 or later. This means that oil producers and other commodity exporters will be running trade deficits for the foreseeable future.

2) Global demand for luxury, durable, and capital goods will remain depressed until 2010 or later. This means that "new economy" nations like US, UK, and Japan will be running trade deficits this year.

How a Dollar Collapse will drag other currencies down

Among these many nations running trade deficits, there are four groups whose currencies are vulnerable to a US dollar collapse:

1) Nations who are financing trade deficits by selling off dollar reserves. Nations in this category include: India, Japan, Saudi Arabia, and most middle-east oil producers.

2) Nation who are financing trade deficits with large amounts of US foreign aid. Nations in this category include Israel and Egypt.

3) Nation who are offsetting trade deficits with remittances from citizens working abroad. Nations in this category include Mexico and India.

4) Nation who trade heavily with US while running trade deficits with rest of the world. Nations in this category include Japan and Mexico.

Trade Balance will be key to a currency's survival

What all this means is that the trend in a nation's trade balance in the last three month will most probably determine the fate of its currency. With that in mind, here is a listing of trade balances from nations around the world.

(Updated Saturday, February 07, 2009)

Asia

South Korea
Currency: won—
Survivor
Trade Balance:
Growing Surplus
Story: South Korea posted current-account surplus for a second straight month in November.

China
Currency: yuan—
Survivor
Trade Balance:
Growing Surplus
Story: China's trade surplus widened to a record $40 billion, from $35.2 billion in October

India
Currency: rupee—
Outlook Negative (Huge dollar reserves)
Trade Balance:
Growing Deficit
Story: India's Trade Deficit Grows Worse
Story:
Indian Trade Deficit Widens In December

Pakistan
Currency: rupee—
Doomed
Trade Balance:
Growing Deficit
Story: Trade deficit widens to $9.56b

Japan
Currency: yen—
Outlook Negative (Huge dollar reserves)
Trade Balance:
Growing Deficit
Story: Japan trade deficit explodes
Story:
Japan's Trade Deficit Widens as Exports Plunge Most on Record

Vietnam
Currency: dong—
Unclear
Trade Balance:
Shrinking Deficit
Story: Vietnam's Trade Deficit Widens to Record $17 Billion
Story: Vietnam's January trade deficit down almost 90%

Thailand
Currency: Thai baht—
Survivor
Trade Balance:
Growing Surplus
Story: Thailand Has Current Account Surplus as Demand Sinks


Indonesia
Currency: rupiah—
Survivor
Trade Balance:
Growing Surplus
Story: Indonesian Trade Surplus Increases In December

Malaysia
Currency: ringgit—
Unclear
Trade Balance:
Shrinking Surplus
Story: Malaysia' s trade surplus shrinks in October and November

Sri Lanka
Currency: Rupee—
Doomed
Trade Balance:
Growing Deficit
Story: Trade deficit widens in November

North America

United States
Currency: dollar—
Doomed
Trade Balance:
Growing Deficit
Story: Why US trade deficit is worsening

Canada
Currency: dollar—
Unclear
Trade Balance:
Shrinking Surplus
Story: Canadian Trade Surplus Narrows for a Second Month
Story:
Canadian Trade Surplus Narrows for a Second Month

Mexico
Currency: peso—
Doomed
Trade Balance:
Growing Deficit
Story: Mexico monthly trade deficit hits record $2.8B

Panama
Currency: peso—
Doomed
Trade Balance:
Growing Deficit
Story: Panama's trade deficit near $1000 per person

Costa Rica
Currency: colon—
Doomed
Trade Balance:
Growing Deficit
Story: Costa Rica suffered a worsening trade deficit

South America

Chile
Currency: peso—
Survivor
Trade Balance:
Growing Surplus
Story: Chile November Trade Surplus Grew as Imports Shrank

Brazil
Currency: real—
Outlook Negative
Trade Balance:
Growing deficit
Story: Brazil' s Currency Falls as Trade Surplus Narrows
Story: Brazil Posts First Monthly Trade Deficit Since 2001

Ecuador
Currency: Dollar—
Doomed
Trade Balance:
Growing Deficit
Story: Ecuador posts $500 mln trade deficit in Nov

Europe (non-Euro)

Switzerland
Currency: Frank—
Survivor
Trade Balance:
Growing Surplus
Story: Swiss Trade Surplus, Retail Sales Rise; Fears Remain

Sweden
Currency: Krona—
Survivor
Trade Balance:
Growing Surplus
Story: Swedish Dec trade surplus up as imports sag
(Updated Saturday, February 07, 2009)

Norway
Currency: krone—
Unclear
Trade Balance:
Shrinking Surplus
Story: Norway's global trade surplus slipped 0.3% on the year in October

Britain
Currency: pound—
Doomed
Trade Balance:
Growing Deficit
Story: UK trade deficit widens in October
Story:
UK trade deficit hits a record as weak pound fails to help

Iceland
Currency: krona—
Collapsed
Trade Balance:
Collapsed
Story: How Iceland Collapsed, Events Turning Violent In Iceland

Ukraine
Currency: hryvnia—Collapsed
Trade Balance:
Growing Deficit
Story: Panic as Ukraine's currency plummets, Ukrainian trade gap widens

Russia
Currency: ruble—
Unclear (Huge dollar reserves)
Trade Balance:
Shrinking Surplus
Story: Russia's trade surplus shrank to $7.1 billion in November

Turkey
Currency: lira—
Unclear
Trade Balance:
Shrinking Deficit
Story: Turkey's foreign trade deficit down 48.8 percent in November

Europe (Euro)

Euro Zone
Currency: Euro—
Unclear
Trade Balance:
Shrinking Surplus
Story: Euro area external trade surplus 0.9 bn euro
Story:
EU Trade Balance Falls into Deficit

Germany
(refuses to print money like US)
Currency: Euro—Unclear
Trade Balance:
Growing Surplus
Story: German trade surplus unexpectedly expands In October

France
(wants to print money like US)
Currency: Euro—
Unclear
Trade Balance:
Shrinking Deficit
Story:
French trade deficit hits new record in October
Story:
French Trade Deficit Falls More than Expected, Exports Rise 0.8%

Ireland
Currency: Euro—
Unclear
Trade Balance:
Growing Surplus
Story: Imports fell 14% in three months to October 2008; Exports rose 2%

Spain
Currency: Euro—
Unclear
Trade Balance:
Shrinking Deficit
Story: Spanish current account deficit narrows in october
Story:
Spain Nov trade deficit shrinks 32 pct

Italy
Currency: Euro—
Unclear
Trade Balance:
Growing Deficit
Story: Italy non-EU trade deficit widens y/y in November
Side note:
Ability to repay debt in question
Story: Italy's debt levels are greater than value of economy

Greece
Currency: Euro—
Unclear
Trade Balance:
Shrinking Deficit
Story: Greece's trade deficit dropped 13.9 pct in October
Side note:
Ability to repay debt in question
Story: Greek debt spirals after Olympics

Middle East

Israel
Currency: shekel—
Doomed
Trade Balance:
Growing Deficit
Story: Israeli exports are plummeting

Saudi Arabia
Currency: riyal—
Outlook Negative (Huge dollar reserves)
Trade Balance:
Growing Deficit
Story:
Saudi Arabia's 2009 Budget Deficit

Egypt
Currency: yuan—
Doomed
Trade Balance:
Growing Deficit
Story: Egypt govt deficit above target in July-Sept

Africa

Zimbabwe
Currency: Dollar—
Collapsed
Trade Balance:
Collapsed
Story: Zimbabwe: Living with hyperinflation

South Africa
Currency: rand—
Doomed
Trade Balance:
Growing Deficit
Story: South Africa' s rand falls against euro as trade deficit widens

South Pacific

New Zealand
Currency: dollar—
Doomed
Trade Balance:
Growing Deficit
Story: New Zealand' s annual current account deficit increased to 8.6 percent of GDP

Australian
Currency: dollar—
Unclear
Trade Balance:
Shrinking Surplus
Story: Australia' s Trade Surplus Narrows on Export Decline

Philippines
Currency: peso—
Doomed
Trade Balance:
Growing Deficit
Story: 11-mo trade gap widens to $6.9B

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0 Responses to Trade Deficits/Surpluses Around The World

  1. Anonymous says:

    Trade balance of Russia is positive.

  2. Thanks for the heads up.

    I assumed that because Russia had been forced to sell 120 billion of its dollar reserves that it had been running a trade deficit because of falling oil. That was incorrect, the fall in the rubble and Russia's reserves was due nearly entirely to "flight to quality". There is very little foreign capital left in Russia right now.

    Russia was the only country I didn't double check, so all the other trade balance info should be accurate.

  3. Anonymous says:

    Eric,

    I would like to ask you a question :
    you are considering seperatly the country inside the european union.
    Is there a reason for that ?

    While I do agree more or less with you that French and Germany want different policy about money printing... Still the BCE will decide for the entire euro group.

    I do not think that French and some other country can just print new euro.
    They can expand their debt but then, the european union will give a fine for those country to non respect of the european union conventions.

    It may take a while to see clearly the direction BUT I do believe all the countries inside the eurogroup will act in as one.

    Regards,
    Romain.

  4. axa says:

    hey numnuts - Aussie is $AUD not yuan. Not yet anyway (I for one welcome our chinese overlords - WTF??). Obviously detailed research has been undertaken.

  5. dashxdr says:

    1) Personally I think the EEC will fall apart, the euro will tank and each former EEC country will look out for its own interests. Germany will be fine.

    2) Switzerland ok? Considering it is mostly propped up by its finance/banking industry, others are saying it might be the next iceland...are you confident it will survive?

    3) I consider the recent fall of oil prices to be a US triggered act of economic warfare. Russia, Middle East, Venezuela -- these countries are impacted most by a drop in oil prices. $35 oil is ridiculous. Demand didn't drop that fast. US couldn't respond with the military to the Georgia/Ossetia situation, so they did the next best thing. Crash oil prices on the corrupt futures exchanges. Voila! All the "bad" guys, who were getting uppity, get slapped. It's too convenient.

  6. Anonymous says:

    What about the Norwegians'?

  7. Anonymous says:

    >> dashxdr

    I would not take my desire for reality ! ;-)

    I am european and I really believe that everybody understand that creating the EEC was a correct decision.

    Probably that each country will respect less the economic condition for the EEC group, but I think that believing people will go back to lira, french franc, mark does not make sense.

    The euro itself is clearly here to stay, we have too much to benefit from it. A rollback to old currency doesn't make any sense.

    Look at what Eric wrote : the middle east plan to create a common currency too. It is a trend.

    Then I have hard time thinking that germans would do extraordinary well and the french at the next border beeing at the bottom of the crisis.
    Does not make sense either.

    Sure, there is going to be difference due to the nature of the economies and each country policy(debt control) but somehow the general BCE / euro rate & policy will determine the future of the whole european union.

    Romain.

  8. Anonymous says:

    Any idea regarding other Asian countries? i.e Singapore, Malaysia, Indonesia....

  9. Anonymous says:

    Some of these countries intuitively dont make sense even if the numbers look bad currently.

    Saudi Arabia has huge natual resources ditto Australia. With the recent commodity sell off they've had to increase their deficits, but I think this is a temporary phenomenon until the markets become sane again.

    Ireland is a mess due to over reliance on real estate and a service economy to fuel growth.
    Switzerland is not the Switzerland of old. Their financial system is in tatters possibly on a relative basis even worse than ours.

    Germany, possibly France and the scandinavian countries are the only countries in Europe that I like in the long term. Germany especially and France need to think about severing the link of their currencies to all the other "dead beat" countries of the EU and go back to a sovereign currency based on THEIR economic conditions, right now they're "European Chinese".

    Many new emmerging markets DONT have the credit problems of the G7 and their ilk. Their markets are immature and less exposed then the developed markets and more importantly their citizens don't have the level of entitlement.

    The South Americans sans Argentina (who likes to think they're part of the G7) will do well.

    Numbers aside. The REAL question is this. Can there be a new trading block between the manufacturers of the east and the resource countries everywhere else? Is India part of the equation? With a huge, motivated market possibly, they need a lot of Korean refridgerators in India, but whats in it for the Koreans? Russians need Chinese clothes, they have oil Chinese have clothes I see a deal there.

    See the Chinese are going to need to lead this thing and build it from the ground up. They need to explore markets in resource rich countries/continents and gear their production of goods to those markets AND VERY IMPORTANTLY not go the Japanes route of ignoring and discouraging DOMESTIC consumption, if they want a higher standard of living they need to consume some of what they make. In fact the only reason to export anything is so that you can import things for your own purpose.

    This new international economy needs to be based on a defacto "barter currency", Manufactered goods for commodities and the currency valuation needs to reflect the acutal value of those transactions, gold would be a great score keeper on this. Service based economies are always at a disadvantage to the locally provided services in their respective countries and should be thought of as a domestic endeavour, thats Why India is perplexing to me. It is mainly a service based economy, info tech, engineering, call centers etc. No natual resources, not really a manufactoring titan like China.

  10. dashxdr says:

    >>Anonymous: I would not take my desire for reality ! ;-)

    I think the Saudi/Middle East currency was going to be backed by gold, was it not? So that is a new thing under the sun.

    The shearing forces that stress the EEC are simply too great. There is too much benefit for member nations to print with abandon (France, Italy) at the expense of saving/honest money nations (Germany).

    France and Italy will be sorry to see the EEC collapse. Germany? It'll extricate itself out of self interest. Then let the other leech countries feed on each other.

    EURO -> ZERO, like all fiat currencies. It's only a matter of time.

  11. Anonymous says:

    will central american and carribean economies tend to go the way of the dollar? exceptions?

    what about panama, costa rica, ecuador, and the northern sout american countries?

  12. Rick says:

    What do you think of The Netherlands?

    http://www.cbs.nl/en-GB/menu/themas/internationale-handel/nieuws/default.htm?Languageswitch=on

    Strong dependency of Germany and "big in banks" (ING, ABN-Amro/Fortis, Rabobank, AEGON).

  13. Roger L says:

    Any thoughts about Sweden and Swedish Krona?

  14. Sorry about the yuan mistake axa.

    ----------------------------------

    "Switzerland ok? Considering it is mostly propped up by its finance/banking industry, others are saying it might be the next Iceland...are you confident it will survive?"

    Yes, and you bring up a good point I forgot to mention. Some nations are going to be helped by

    1) Nations with idiotic/reckless banking giants that owe several times the countries GDP.
    2) Third world nations who owe debt denominated in dollars

    For example, Iceland recently needed a bailout load from the IMF, (which ended up being 2.1 billion). If the US follows the Weimar Republic, Iceland will be able to repay that loan in 2011 with a single fish.

    Iceland still in trouble for a different reason: its main/only export is fish. Meanwhile, Switzerland's industry is more diversified and resilient, which is why they are running a trade surplus. As of right now, I expect the Swiss frank to retain most of its value.

    "3) I consider the recent fall of oil prices to be a US triggered act of economic warfare. Russia, Middle East, Venezuela -- these countries are impacted most by a drop in oil prices. $35 oil is ridiculous. Demand didn't drop that fast. US couldn't respond with the military to the Georgia/Ossetia situation, so they did the next best thing. Crash oil prices on the corrupt futures exchanges. Voila! All the "bad" guys, who were getting uppity, get slapped. It's too convenient."

    I have heard this argument before, but aren't you forgetting the second part? The part where Russia starts buying up all the gold futures and demanding delivery to crash the COMEX. I don't know if there is any truth to these rumors, but Russia is still in some trouble for two reasons:

    1) its dollar reserves will soon lose a lot of value
    2) Oil prices are headed down in terms of gold; because once the dollar crashes a lot of the global demand for oil will disappear.

  15. "you are considering separately the country inside the european union Is there a reason for that?"

    Yes, it is very important to see that there are two competing interests in the EU bloc:

    1) Responsible nations like Germany with balanced budgets and strong manufacturing. Germany has strong savings and would be hurt by printing Euro.
    2) Irresponsible nations like Italy and Greece. These Irresponsible nations went on a debt binge and lived beyond their means and now they want to print away their debts.

    I haven't researched this yet, so I don't know how those two forces will play out. Read My last entry for more info on this euro split.

    "It may take a while to see clearly the direction BUT I do believe all the countries inside the euro group will act in as one."

    Yes, but how will they move? Will they follow US/UK money printing (which would be hurt the responsible nations like Germany)? Or will they choose deflation (deflation would REALLY painful for nations running big trade and budget deficits, especially Italy and Greece?

  16. "Saudi Arabia has huge natural resources ditto Australia. With the recent commodity sell off they've had to increase their deficits, but I think this is a temporary phenomenon until the markets become sane again."

    The US consumes nearly half the worlds oil. When the dollar crashes, 30 to 40 percent of the world's demand will disappear. Eventually this demand will be taken up by other countries like China, but in the short run it means oil prices fall even further relative to gold.

    "Saudi Arabia has huge natural resources ditto Australia. With the recent commodity sell off they've had to increase their deficits, but I think this is a temporary phenomenon until the markets become sane again."

    Ireland is a mess due to over reliance on real estate and a service economy to fuel growth.

    "Switzerland is not the Switzerland of old. Their financial system is in tatters possibly on a relative basis even worse than ours."

    1) No nation's finances are worst than ours, because we are the world's reserve currency. Our "special status" has allowed Americans to borrow an insane amount.

    2) While it is somewhat true that the Swiss financial system is in tatters (SOME of the Swiss banks haven't been reckless), but they will probably be saved by the crashing dollar. (See my other comment)

    On that note, it is KEY to realize that the dollar's crash will hurt savers and save debtors. So nations of savers like Japan will see their lifesavings wiped out, and nation of borrowers like Iceland will see their debt wiped clear. It's unfair, but, when you lend to a bankrupt nation, you shouldn't expect to see your money again.

    3) Switzerland has an enormous amount of gold for a country its size (this is one reason Switzerland isn't Iceland).

    "This new international economy needs to be based on a defacto "barter currency", Manufactered goods for commodities and the currency valuation needs to reflect the acutal value of those transactions, gold would be a great score keeper on this."

    That is how it used to work under the gold standard. Gold was the global "barter currency"

  17. Williams says:

    I am not so certain of the reasoning you have employed in this article.

    So what if a country is running a deficit financed by selling dollars (cases 1 & 3). When Dollar becomes less valued, it will still pay for their deficits provided it is an inflow balanced by an outflow, which I assume it must be for most countries, since otherwise the situation is inherently unstable and country's central banks would have done something sooner.

    Take the case of Mexico's remittances. Dollars will continue to flow into Mexio and they will be used to buy imports for Mexico. Dollar devaluation DOES NOT change anything unless it also ceases to be the reserve currency for trading nations. Now that is a far cry from devaluation and requires some geo-political alignments and so, cannot be predicted using economics.

  18. Williams says:

    To be clearer on the matter, if Chinese imports double in price following dollar halving in value against yuan, couldn't that extra outflow of USD be balanced by an extra inflow of USD from the usual sources.

    After all, with run away inflation and all, there are probably double the # of dollars that
    (1) people can remit back from US to their home countries (case 3 above)
    (2) US can give as payment to its trade partners running trade surplus with it and whose currency doubles in value compared to USD (case 4 above)

    If someone is actually using reserves to pay for their deficits that is game with an expiry date. Your case 1.

    Freebies to Egypt and Israel will also stop when US economy derails. Your case 2. So agree with you that cases 1 & 2 are dangerous for any country to be involved in. But I think such countries are very few in number. For instance, India sold off their Dollars to control the Rupee's appreciation against USD in early 2008 (not to finance the deficit).

  19. Anonymous says:

    A few comments on Russia.

    Russian reserves are not solely dollars. The currency reserves are 45% dollar, 44% euro, 10% pound, 1% yen. Apart from currency there is some gold too.

    The size and structure of reserves approximately matches the Russian corporate debt (the public debt is negligible). So if dollar reserves lose their value then the dollar debt will do the same and in the end Russia loses nothing.

    A large decrease of reserves in the last few months is not only because of ruble defense but also because companies with large dollar debt were refinancing their debt to rubles from Central Bank. So they will pay their dollar debt to foreign banks and will be left with ruble debt. The goal is not to bet on if dollar will fall or not, The goal is to avert risk.

    In the last few weeks Central Bank squeezed liquidity and now there are no more rubbles to buy currency. So the decrease of reserves is likely to stop or significantly slow down now. And Russia will stay in safe position ready for any outcome.

    Oil prices fall, but Russia will curb imports accordingly. For instance, Russia car market was fastest growing in Europe (Russia imports most of the cars). A year ago there were predictions that it will surpass German market this year. But this is not going to happen now. Instead there will be sharp drop of car imports.

    On the other hand, there is no way for Europe to stop buying Russian natural gas. The calls to replace it with nuclear power sound funny, Europe will need to build like 50 nuclear plants to replace natural gas imports from Russia. It will take a couple of decades to do so. Besides Russia is one of only few existing players on the nuclear market too,

    As for the gold... Well, Russia produces gold too. Russia has gold mines. It has diamonds. It has everything. The only thing that it lacked for a while was smart leaders. Hopefully that changed now too.

  20. Anonymous says:

    What about the Thai baht? It has been stable against the US dollar lately, while other Asian currencies have been volatile. Also, what do you think of the Swedish crown? It has weakened considerably against the Euro and the US dollar, so maybe it will strengthen...Sweden has good fundamentals and a better banking sector than most of Europe.

  21. I have updated this entry, adding the following countries:

    Costa Rica
    Ecuador
    Panama
    Malaysia
    Indonesia
    Thailand
    Sri Lanka
    Pakistan
    Sweden
    Philippines

  22. Anonymous says:

    Maybe Russian central bank will save rouble, at cost of economy total destruction. The central bank is keeping rouble from collapse by shrinking money supply. In last few weeks, M0 shrinkened from 5.5tln to 4.3tln - faster than in 1929 in usa!

    on 10.02.09: M0=4.3tln rur, M2=13.4tln rur, reserves=384bln usd, e.g. 13roubles per 1 usd in reserves.

  23. stibot says:

    I had no doubt about dollar collapse before, but now i'm not so confident: it's likely we are going to see race which currency is to be crushed first.

    There just appeared concrete numbers about amount of toxic assets in Europeans banks: eg. Euro banks holding $24 trillion toxic assets. And it is Switzerland included too.

    Next, there is a article showing leverage ratio of US and Europeans/Switzerlands banks: in Europe it is like 50:1, while it is 20:1 in the US.

    Also interesting to watch US$ is much more trusted than Euro in these days: Euro moves to the opposite site of a gold (and US$), check eg. the first picture in Fear Pushing Gold to New High this Year on Market Oracle web.

    Out of topic: if opening any article you published on your blog, there is Post a Comment button at the bottom. This button can not be found if someone has disabled images within the browser.

  24. Doctor HU...Shih says:

    Asian Tigres: add some e.g.
    "Prosperity isle" exports DRAMS.
    2/09 exports c.-39% imports -49%.
    Yet it has cUS$220 b. reserves.

  25. Pluto says:

    It's been two months since you wrote this article, Eric. There have been a few structural changes in trading currencies and strategic alliances between nations.

    It seems to me the USD has been marginalized by the Arabs and the Asian trading bloc eschewing the dollar for the Yuan.

    I'd love to see an update, just some touch-ups on the original would be interesting. It's remarkable how quickly fundamentals are changing. They're not so "fundamental" anymore.

  26. SatyaPranava says:

    i would love to see an update to this article in early 2011, eric, if you're able to pull it off.

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