One of the current economic issues in America is the trade deficit, which is persistent and in most years growing. The U.S. had a slight trade surplus in the early 1980s, but since then has had a trade deficit. The deficit was growing through the mid-2000s and while it is still quite large, the straight downward trend in the trade deficit has flatlined (Trading Economics, 2014). The U.S. still has the world's largest current account deficit -- by a factor of nearly four (CIA World Factbook, 2014). Petroleum products account for a substantial portion of this, as much as 10%, but the development of fracking has reduced the percentage that oil contributes to the trade deficit, and has helped the trade deficit to flatline (U.S. Census Bureau, 2014). The major import partners are China (19%), Canada (14.1%), Mexico (12%) and Japan (6.4%). Of these, Canada and Mexico are not major contributors to the trade deficit as they are major export partners as well. China, which has the second-largest trade surplus in the world, is the major source of the trade deficit, larger even than the impact of petroleum.
There are several impacts to the trade deficit. The trade deficit does provide some benefits. As per Ricardian theory of international trade, a trade deficit reflects an increase in the availability of goods, either breadth, depth or just at a lower price, reflecting the comparative advantages of the countries involved....
has entered into a large number of trade agreements, in order to spur more trade and reap these benefits even more than the country already does (Amadeo, 2014).
But there are a number of negative impacts to having such a large trade deficit. First, when we consider the GDP accounting identity, net imports is a drag on total GDP for the country. While net exports boost GDP, net imports reduce GDP. This means that a negative trade balance is a net outflow of capital from the country to its trade partners. It is not hard to see the effects of this -- in the U.S. factories are closing while in China manufacturing is a booming business. Real wages in the U.S. are stagnant since 1980, while real incomes in the developing world continue to rise. This is not to argue in favor of protectionism, but these correlations are not coincidental.
Many economists have echoed these concerns. Krugman argued that the trade deficit fuels U.S. debt, which eventually will need to be repaid. Bernanke is also concerned that running such a large and persistent trade deficit will be harmful to the economy -- any given trade deficit is not a problem, but a massive, persistent one is. Mankiw notes that the trade deficit is a symptom of consumer spending, or put another way,…
S. economy, causing job losses that reach into the most technologically advanced industries in the manufacturing sector and affect every state, according to a January 11 press release by the U.S.-China Economic and Security Review Commission" (U.S. Info State Government, 2005). Also, these job losses not only negatively impact the population, but they also affect the business community. With fewer workers and resources, American companies will no longer be able
This, in turn, further stimulates a massive intake of products and services, widening the trade deficit. It is important to note that, despite the fact that U.S. trade deficit has sometimes been associated with low U.S. products and services competitiveness on global markets, this is most likely not the case. According to some critics, this would lead to decreases in export level, encouraging greater levels for the trade deficit. However,
S. deficit in ATPs in 2004. In 2004, the U.S. borrowed $665 billion annually from foreign lenders to finance its enormous trade deficit, an amount equivalent to $5,500 per American household (Bivens, 2004). This borrowing entails serious consequences for the U.S. economy that have thus far been subdued by low interest rates. However, if the deficit follows current trends, Bivens projects that the external debt of the U.S. will rise from
Like what was state previously, the main reason for the peg to be in place was to help provide China, with consistent economic growth (by making certain that their currency will remain at a set rate). This has caused sharp divisions between the U.S. / world opinion and China, as a number of different countries believe that the current policy gives the yuan an unfair advantage on world markets. As
Earlier studies based on Bretton Woods data were only refuted because the data sets of the later studies were insufficiently long. It may be, therefore, that Himarios is one of many that will now be able to demonstrate that long-term equilibrium is possible. It may that it requires nearly at least three decades' worth of data and a multi-country study in order to see the equilibrium emerge, meaning that
Trade between the United States and Japan [...] trade between the United States and Japan, such as exports and imports of goods, exports and imports of services, tourism, and investments. Japan and the United States are two of the premier forces in trade around the world. The two countries depend heavily on each other in a variety of trade areas, from electronics to tourism and banking. Together, they form