Question

The balance of trade is the nation's balance sheet of trade with the rest of the world. It represents the difference between the monetary value of exports and imports. Some experts believe a deficit is harmful. Some do not. The US has run a large trade deficit for many years.Do you think it is harmful...or not? What do you think the longer term consequences are? Also in 2014 the deficit was reported as a seven year low point. Why do you think that occurred? What is the likely outcome of the current 2016 "strong dollar" and an even stronger dollar after the recent "Brexit"?

300 word minimum

Answer 1

Trade deficit occurs when a country imports more than it exports.A trade deficit is not entirely good or bad .A trade deficit can at times lead to stronger economic growth.Again trade deficits can cause a balance of payment problem which will lead to shortages of foreign exchange and hurt economies .The sharp rise in the value of the dollar has been the cause of trade deficit in US as the price of US goods had risen in comparison to the price of foreign goods.Another reason has been the increase in US consumption of goods and imports because of US recovery.Economists are of the opinion that trade deficit is not a prolem for the US economy as US pays less  for borrowing from abroad,financing its high consumption at low cost, which in turn gives impetus to global demand.

Trade deficits can  hurt the economy at times but does not harm the economy in the long term .The country is in a better position as it allows inflow of capital from aboard and trade deficit rather than reduce investment in order to meet the shortage  in savings .

Increasing energy production at home and rising US exports has led to low trade deficit in 2014.American exports of goods and services reached a high record of $194.9 billion in November 2014.

Strong dollar means US dollar has rise to a level that has relative high exchange rate for other currency.The 2016 strong dollar had impacted international trade as exports became expensive and imports became cheaper.Stronger US dollar widened the trade deficit.A strong dollar can be bad for multinationals as US goods becomes more expensive in foreign countries. .BREXIT gave rise to strong dollar which hurt US trade as stronger dollar lowers the export of US.