Trade Balance Gimmicks

The trade balance announced today at $40.2 billion for the month of December is still an understatement. The data takes advantage of both the volume effect and the price effect. The trick is in using 2002 constant dollars which was the peak of the USD index hence making exports more valuable and imports less valuable. That is the price effect. The volume effect comes from the fact that countries with weak currencies export more and import less, hence the volume effect. You cannot have both working at the same time. That is simple economics and logic. A currency cannot be weak and strong at the same time. Therefore, the data is unreliable and only a weak attempt to make things less bad.