Trade Deficit Analysis

2. The balance of trade is the point where the difference between exports and imports is favorable for the country. When the country imports more than it exports, it results in a trade deficit and when the country exports more than it imports, the country runs into a trade surplus. The balance of trade for a countries economy is a very fine balance. The economic condition can change and a deficit or surplus may be an ideal situation.

The general standard for measuring the overall size of the nation's economic activity is the value of gross domestic product (GDP). One of the components of GDP is a measure of the value of exports and imports of goods and services. The hitch is that GDP includes a large component of non-tradable that does not or cannot enter into international trade flows to any significant degree-for example, most buildings and structures, and personal and government services. Consequently, even though internationally traded items such as financial services and travel and transportation services are included in GDP, when we compare the size of the foreign sector with the size of the domestic economy, we end up comparing apples with apples and pomegranates. As a result, comparing exports or imports of goods and services to GDP may understate the importance of international trade to relevant sectors of the domestic economy

In the 1960s, the United States was experiencing the balance of payment problem when its trade balance was in a substantial deficit, the US dollar was under an attack and a massive amount of gold flew out of its official reserve. Such issues in the balance of payment if exist for a long time can be a threat to the whole economy because balance of payment closely interacts with key macroeconomic variables such as GDP, exchange rates, interest rates and inflation rates. However, it was not an easy task for the Kennedy government to solve the balance of payment problem as

Following the travels of Christopher Columbus and the Conquistadores, the Spanish soon realized that they were as a matter of fact, not off the coast of China. But rather than completely abandon the area due to its lack of gold, silk, and spices, they decided to stay for the abundance of silver. In this, they enslaved and killed entire populations in their quest for this mineral. However, in doing so they practically started a new economic era for the Europeans. The heightened flow of silver from the mid-16th to the early- 18th century resulted in social and economic effects in trade centers around the world by further integrating the Europeans into the global trade market and consequently increasing social divisions in China due to improved

Operating in an international economy is a must for every nation. However in order to keep an economy out of long term debt the foreign sector need to be as balanced as possible. As shown in the circular flow model (figure 2) too many imports can lead to major leakages in our economy causing foreign debt to rise. To slow rising foreign debt the causes need to be considered:

Many indicators serve to measure the degree of trade openness. The first is designed to assess directly the level of economy openness to foreign trade. The degree of openness measures the level of the external constraint and it is obtained by the ratio of the value of foreign trade on the GDP. The second indicator (distortion) aims to measure the impacts of protectionist policies of a country.

One of the major advantages of trading is that it allows producers to concentrate or specialize their work in the type of goods they produce best. When people decide to specialized in a specific profession an become doctors, farmers, teachers, or any other profession within an economy, they will be able to produce goods and offers different services that can be trade for any goods or services they may need. In this same way countries can become specialized in the production of specify products and/or services and trade those with other countries. However, trading and importing products and services from other countries also has its disadvantages. As a result of the different products imported governments impose certain restrictions and limitations to protect the domestic production and market of every country involve in any kind of trading transactions. Governments have imposed taxes on trading transactions adding them to the cost of importation, and have the purpose of restricting and/or limiting the imports of goods and services into a country. These government

The impact of the European Exploration on global trade began in 1492. Global trade impacted the world because our population decreased from diseases, slave trade, and hunger. The Colombian Exchange was basically a slave trade.Explorers from Europe, Asia, and Africa travelled to America. Europeans brought things along with them for example Diseases like Smallpox, Typhus, Measles, Malaria, Diptheria, and Whooping cough.America did not have any diseases until the Colombian exchange.

The financial crisis of 2008 has been described as the worst financial crisis the world has seen since the great depression, but there are now murmurings of the potential for an even greater financial crisis, a currency crisis, caused by the demise of the US Dollar. The Dollar has been the reserve currency of the world since it took over from the Pound at the end of world war two, but we examine if it is about to crash spectacularly?

since 2000 (Edwards, S., 2005).” As a result of the increase in foreign demand for U.S. assets, Americans have had access to foreign investment enabling the United States to function with large deficits for years. Looking forward, the United States dollar and the economic health of the country is very dependent on foreign investment in U.S. assets. A potential risk looms in the chance that Asian central banks might lower their demand in U.S. assets resulting in a sharp decline in the U.S.

The vast majority (about three fourths) of our trade deficit in manufactured goods is caused by imbalanced trade flows with Asia, as shown in Figure 2. The deficits with Asia are large and rapidly growing, despite very high rates of growth in the region until 1997. Europe and NAFTA were each responsible for about 13% of the deficit in 1998. The U.S. ran a small surplus with the other countries in the Western Hemisphere, and with the rest of the world, in this period. http://www.epi.org/content.cfm/webfeatures_viewpoints_tradetestimony

The key important role of government intervene in international trade is interest to protect the domestic producers in their country. Political arguments concerned with protecting the interests of one group, which are producers often at the expense of another within a nation, which are consumers. First, government should protect jobs and

Some of the countries with surplus commodities may dumb them on international markets at a low price. Under such conditions, some of the efficient industries can might find difficulties in competing for long period. Furthermore, countries whose economies are mostly rural will face unfavourable terms of trade. For example, ration of export prices to import prices. Which means that their export income is more smaller than their import payments the make for high value added imports, as it leads to subsequently large foreign debt levels.

Carbaugh (2011) asks, "Can the United States Continue to Run Current Account Deficits Indefinitely?" (p. 361). Ultimately in the long term the answer is no, but the question could be rephrased to ask: (1) Does the United States' unique position in the world economy allow the country to safely run persistent external deficits? and (2) can persistent U.S. deficits in the current and payments accounts be adjusted without bringing about economic recession or crisis? Japan, China, and Middle Eastern oil countries have enabled this deficit to continue by heavily investing in U.S. Treasury securities (Carbaugh, 2011). Because foreigners desire to purchase American assets, Carbaugh (2011) concludes that “there is no economic reason why [the

The international trade of goods across the world accounts for approximately 60% of the world Gross Domestic Product (The World Bank, 2014). A great proportion of goods transactions occur every second. The primary question is whether international trade benefits a country as an entirety, and, if so, why would a country implement protective trade policies to restrict particular exports? To address this question, this essay aims to explore the impact of trade on various economic stakeholders, including consumers, producers, labour and government and, furthermore, will compare models and theories with reality to ascertain the true winner/ loser in the international trade market.