US Economy Cooling Down

The US trade deficit with China fell slightly last month as Hu Jintao begins his tour of the US. This followed a series of interest rate rises in the US that reduced demand from American consumers - this should also help reduce the US inflation rate which was 3.4% last month - but this month's figures are not in yet. It should also reduce US economic growth which will frustrate the Americans when growth in China is now in excess of 10% a year. However, the reduction in US demand will also slow growth in China as demand for Chinese products fall.

Recent events have illustrated even more clearly how closely the American and Chinese economies are now linked - China could be considered in effect as the 51st American state (or perhaps America is the 28th Chinese province?)