Outside the Box: Why the Global Economy Is Still Tied to the United States
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September 3, 2008
Even though many economies around the world are becoming more independent, they are still dependent on the United States in many respects. For instance, Mexico and Canada depend on the U.S. for more than a quarter of their Gross Domestic Product.
In addition, the U.S. comprises almost 50 percent of all Chinese exports. Now that figure is certainly beginning to come down, but there is a long way to go before they are not relying on America for a significant piece of their sales. Many of the Southeast Asia countries do get the majority of raw materials such as timber and rubber from Latin America, but these materials often end up in products destined for the United States. So any slowdown with America’s economy will certainly be felt in these Southeast Asian countries.
As far as Latin America goes, commodities are definitely king. The U.S. and China are the two largest purchasers of this region’s excess supplies of oil, minerals and agricultural products. A reduction in U.S. and China demand for these products would certainly put a lot of stress on Latin America’s economy.
A number of European countries are currently experiencing big deficits, particularly in Eastern Europe. Obviously a U.S. slowdown that would impact the global economy would be very bad for them. Exports are a very important part of the growth equation in Europe, with the U.S. accounting for much of the business. That being said, any reduction in U.S. demand for their goods and services would be a problem. The bottom line is that the United States still has a huge global footprint economically, as well having a profound impact on business sentiment around the world.
Jeff Neal
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
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