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Economist: US Markets 'Overreacting' to Japan Earthquake

Following an earthquake and tsunami that has devastated Japan, fears of a nuclear crisis are now sending stocks lower. Economist Joe LaVorgna, however, thinks the markets are "overreacting."

In light of the disasters in Japan, LaVorgna said the decline in the U.S. stock market is not commensurate with what the impact would be on U.S. economic growth.

The U.S. runs a $60 billion annual deficit with Japan, noted LaVorgna, chief U.S. economist at Deutsche Bank. Being as the largest part of the deficit is in automobiles and parts, the U.S.'s GDP could improve if America imported less and produced more.

U.S. exports to Japan, LaVorgna added, are only 5 percent. So he said that number would have to be much larger for the events in Japan to have a substantial effect on the U.S. economy.

In the next month, the widespread destruction is likely to hinder the Japan's economic growth, LaVorgna said.

"You have this tremendous shut-in of activity, collapse of production and without knowing exactly what the nuclear fallout will be, you can't go into areas to rebuild," said LaVorgna, chief U.S. economist at Deutsche Bank. "Once the problem is contained, the rebuilding efforts begin and you get more growth six, nine months forward."

Before the earthquake crippled Japan, Deutsche Bank estimated its 2011 gross domestic product to rise by 1.6 percent. In the short-term, LaVorgna thinks its GDP could fall. Long-term, however, the affect might be more muted. Still, LaVorgna thinks the situation is too fluid to make any calls with full confidence.

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Trader disclosure: On Mar. 15, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Joe Terranova Owns (XOM), (CVE), (IBM), (DIS), (MCD), (VRTS), (C), (GS), (PNC), (USB), (JPM), (UPL), (ABT), (MS), (PBR), (BAX), (TEVA), (BTU), (CNX), (CVI), (RSX), (SU), (CNQ) and (POT).

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