Question

-what are trade gaps?

- are trade gaps bad for the economy?

-what factors have widened the trade gap?

-how does the trade gap affect the ordinary person?

Answer 1

Trade gap shows the value of what US exports as compared to its imports. It is often understood as economic loss even though it is not outright loss and not a matter to be worried.Trade deficit occurred in US because of China's low manufacturing cost. The lower cost was a loss of US factories to foreign countries but at the same time lower import prices did benefit the US companies and consumers and as a result gave a boost to the economy of US .It was a good economic sign as Americans were able to and were willing to spend on imports.

Trade gaps are not always bad for the economy.Trade deficits generally reduce growth but in US trade gap last year was due to large spending on imports.It showed the strength of the economy as Americans had the ability and willingness to import which is not bad .However the trade gap during recession in 2007-2009 fell considerably but after long period of economic expansion the trade gap in goods rose again.  

The tendency of the government to achieve growth faster by borrowing more, contributed in widening the trade gap.A strong dollar is the sign of good health of the economy and has increased trade deficit.A strong dollar makes imports cheaper and exports expensive.So demand for imports increases over exports.

Trade gap do not affect ordinary people on daily basis.But there are consequences as well that affect consumers .Tariff on washing machines increased the price of washing machine.As a result of tariff,businesses that depend on imports from China have to deal with high price.Trade wars however do not benefit any one in the long run and do not bring change in trade deficit..