Given next week is the G20 in Seoul and the U.S. is pressing to address trade balances,  we thought the following chart from the Congressional Research Service is quite timely.  Trade deficits are big drag on GDP (see chart below)  so you can guess who the U.S. thinks the bad guys are.

The Chinese have rejected the U.S. proposal and is lining up with many countries upset over U.S. monetary policy.  The G20 risks, at best, turning into a counter-productive complaint and therapy session about QE2, which is currently not priced, in our opinion.  The FT writes,

Cui Tiankai, a deputy foreign minister and one of China’s lead negotiators at the G20, said on Friday that the US plan for limiting current account surpluses and deficits to 4 per cent of gross domestic product harked back “to the days of planned economies”.

“We believe a discussion about a current account target misses the whole point,” he added, in the first official comment by a senior Chinese official on the subject. “If you look at the global economy, there are many issues that merit more attention – for example, the question of quantitative easing.

”China’s opposition to the proposal, which had made some progress at a G20 finance ministers’ meeting last month, came amid a continuing rumble of protest from around the world at the US Federal Reserve’s plan to pump an extra $600bn into financial markets.

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Backlash against Fed’s $600bn easing – FT
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Guest post: QE2 worsens China’s currency dilemma – FT