With oil prices skyrocketing and U.S. oil imports on the rise, tensions with OPEC could surface, especially if Saddam Hussein decides to cut production. Finally, Communist Red China considers the U.S. its number one enemy. We have a lot of disagreements with them over issues like Chinese proliferation of ballistic missiles and weapons of mass destruction and their expansionist aims with regard to Taiwan and the rest of the Pacific Rim. Some observers claim that the trade deficit is a benign deficit with no real negative effects. U.S. companies have to match the import competition, but will do so at a cost .
Profits have to be shaved to compete with cheaper foreign goods.
Lower profits have an effect on the stock market , because investors don't like low earnings. Meanwhile, with rising oil prices and our growing dependence on foreign oil, the trade picture could get even worse-perhaps much worse. A strong dollar makes U.S. goods more expensive overseas and foreign goods cheaper here. That means a strong dollar adds to the trade deficit. A weak dollar, with all of its negative implications, would lower the trade deficit.