Paul Krugman says we may not be as exposed to trouble in Europe as you have been led to believe:
America’s European Exposure, by Paul Krugman, Commentary, NY Times: It’s now conventional wisdom that the fate of the U.S. economy over the next three quarters — and hence, also, Obama’s reelection chances — depend on events in Europe. So maybe this is a good time to express some skepticism.
[This] map... — taken from here — tells us that overall, exports to Europe are just 2 percent of GDP..., even a sharp fall in exports to Europe would be only a small direct hit to demand.
OK, caveats: this only measures goods exports, and we should mark the numbers up maybe 25 percent to take account of services. Also, exports aren’t the only channel: if European events cause a Lehman-type event, disrupting financial markets world-wide, all bets are off.
And I should say that there is a long-standing puzzle concerning world business cycles: economies move in synch more than can easily be explained via concrete linkages in the form of exports.
With all that, however, it’s still very questionable whether Europe’s looming recession will actually have that much negative impact here. Decoupling didn’t hold in 2008-2009, but that was an epochal disaster. This time might be different.