Every Silver Lining Has a Cloud

A dramatic drop in the trade deficit fails to impress investors

At first glance, last week's Government trade report looked like welcome economic news. The trade deficit suddenly narrowed to $9.7 billion in March, a 30% drop from February's $13.8 billion level and a far better performance than even the most hopeful economists had projected. After months of frustrating setbacks, the trade deficit was finally coming down sharply, and it appeared that the U.S. was making progress in solving one of its most pressing economic problems.

But economists and investors always seem to search for clouds in even the sunniest skies. They noted that exports in March rose 23%, to a monthly...

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