Trade balance sends signal

The US economy is doing better. We are buying more goods from the rest of the world. While the trade balance will be affected to a degree by changes in the exchange, the key driver is still the level of income growth. The dollar has fallen, but we saw imports spike this last month. The trade signal also tell us that closing the trade gap will be more than just a price problem. You have to look beyond the Marshall-Lerner conditions which is the old school approach to solving trade balance problems.