United States and euro zone: The key role of terms of trade in the recent period

In the recent period, the terms of trade (the relative price of domestic production and imports): Have been more or less stable in the United States; Have deteriorated drastically in the euro zone (import prices have risen considerably more than domestic production prices). The difference stems from the weight of energy imports and the depreciation of the euro. This has considerable implications for the economic equilibrium in both the United States and the euro zone: Import prices do not contribute to inflation in the United States, but they contribute enormously to inflation in the euro zone: accordingly, peak inflation is likely to be much higher in the euro zone than in the United States; The loss of income due to foreign trade is considerable in the euro zone, which must be taken into account in the growth outlook.