trade deficit

Examples of trade deficit in the following topics:

• The U.S. Trade Deficit

  • At the end of the 20th century, a growing trade deficit contributed to American ambivalence about trade liberalization.
  • An even bigger factor leading to the ballooning U.S. trade deficit, however, was a sharp rise in the value of the dollar.
  • By 1987, the American trade deficit had swelled to $153,300 million.
  • But the American trade deficit swelled again in the late 1990s.
  • By 1997, the American trade deficit $110,000 million, and it was heading higher.

• Balance of Trade

  • Suppose the USA imported $1 billion worth of goods and services in 2008 and exported $750 million dollars worth of goods and services, then its trade deficit would be $1 billion minus $750 million, which equals a trade deficit of $250 million.
  • A positive balance is known as a "trade surplus," if it consists of exporting more than is imported; a negative balance is referred to as a "trade deficit" or, informally, a "trade gap."
  • The balance of trade is sometimes divided into a goods and a services balance.
  • Factors that can affect the balance of trade include:
  • In addition, the trade balance is likely to differ across the business cycle.

• China

  • Three issues of particular importance in Chinese-American relations are economic trade, the contested status of Taiwan, and human rights.
  • -China relations, three issues of particular importance stand out: economic trade, the status of Taiwan, and human rights.
  • Since China and the United States resumed trade relations in 1972 and 1973, U.S. companies have entered into numerous agreements with Chinese counterparts that have established more than 20,000 equity joint ventures, contractual joint ventures, and wholly foreign-owned enterprises.
  • The American trade deficit with China exceeded $350 billion in 2006, and is the U.S.' s largest bilateral trade deficit.
  • Among foreign nations, China holds the largest amount of U.S. public debt and has been a vocal critic of U.S. deficits and fiscal policy.

• The Balance of Trade

  • A positive balance is known as a trade surplus if it consists of exporting more than is imported; a negative balance is referred to as a trade deficit or, informally, a trade gap.
  • Assuming that the economy is at potential output (meaning Y is fixed), if the budget deficit increases and savings and investment remain the same, then net exports must fall, causing a trade deficit.
  • Thus, budget deficits and trade deficits go hand-in-hand .
  • The twin deficits hypothesis implies that as the budget deficit grows, net capital outflow from a country falls.
  • The red line represents net imports, which is equivalent to the negative balance of trade, and the black line represents net borrowing, which is equivalent to the government budget deficit.

• Introduction to Foreign Trade and Global Economic Policies

  • U.S. trade deficits grew larger still in the 1980s and 1990s as the American appetite for foreign goods consistently outstripped demand for American goods in other countries.
  • Mounting trade deficits reduced political support in the U.S.
  • Congress for trade liberalization in the 1980s and 1990s.
  • Despite these setbacks to free trade, the United States continued to advance trade liberalization in international negotiations in the 1990s, ratifying a North American Free Trade Agreement (NAFTA), completing the so-called Uruguay Round of multilateral trade negotiations, and joining in multilateral agreements that established international rules for protecting intellectual property and for trade in financial and basic telecommunications services.
  • Officially, the nation remained committed to free trade as it pursued a new round of multilateral trade negotiations; worked to develop regional trade liberalization agreements involving Europe, Latin America, and Asia; and sought to resolve bilateral trade disputes with various other nations.

• Chapter Questions

  • Please define the following terms: current account, trade balance, financial account, and official settlement balance.
  • If a country has a fixed rate regime and experiences a balance-of-payments deficit, please explain how the country must maintain this exchange rate.
  • Many foreign investors are worried over the U.S. government's large trillion-dollar deficits, and the U.S. economy is plagued by massive trade deficits.

• Finding an Equilibrium Exchange Rate

  • Countries have a vested interest in the exchange rate of their currency to their trading partner's currency because it affects trade flows.
  • This leads to a trade deficit, decreased production, and unemployment.
  • Of course, not all products can be traded internationally (e.g. haircuts), and there are transportation costs so the law does not always hold.
  • A nation with a trade deficit will experience a reduction in its foreign exchange reserves, which ultimately lowers, or depreciates, the value of its currency.
  • The flows from transactions involving financial assets go into the capital account item of the balance of payments, thus balancing the deficit in the current account.

• Absolute Advantage and the Balance of Trade

  • Absolute advantage and balance of trade are two important aspects of international trade that affect countries and organizations.
  • Absolute advantage and balance of trade are two important aspects of international trade that affect countries and organizations .
  • A positive balance is known as a trade surplus if it consists of exporting more than is imported; a negative balance is referred to as a trade deficit or, informally, a trade gap.
  • The balance of trade is sometimes divided into a goods and a services balance.
  • The European Free Trade Agreement has helped countries international trade without worrying about absolute advantage and increases net exports.

• Arguments for and Against Balancing the Budget

  • Balanced budgets, and the associated topic of budget deficits, are a contentious point within both academic economics and politics.
  • There is neither a budget deficit nor a budget surplus; in other words, "the accounts balance. " More generally, it refers to a budget with no deficit, but possibly with a surplus.
  • Balanced budgets, and the associated topic of budget deficits, are a contentious point within academic economics and within politics.
  • In the US, every state other than Vermont has a version of a balanced budget amendment, which prohibits some deficits.
  • During recessions governments should run deficits.

• Financing Balance-of-Payments Deficits and Surpluses

  • Surpluses are easier to finance than the deficits.
  • Government or central bank allows the exchange rate to correct any surpluses or deficits.
  • A country could experience the J-curve Effect, when the trade deficit becomes worse temporarily as its currency depreciates as shown in Figure 1.
  • Unfortunately, the trade deficit initially worsens before improving.
  • For instance, a country is experiencing a balance-of-payments deficit.