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U.S. Trade Deficit

Since 1992 to the autumn of 2008 right before the economic recession, the U.S. has "suffered" from an increasingly growing trade deficit where the U.S. is a net importer. The recession temporarily cut this trade deficit, but since the end of the recession in mid-2009 the deficit has once again grown. Part of President Trump's trade policy was a promise to "renegotiate" trade deals to the "benefit" of America, presumably implying that the U.S. should export more and import less.

With the recent depreciation of the dollar over the summer, it does seem as if U.S. exports will increase while imports (especially from Europe where the Euro has gone up) will decrease. However, it is also important to note that the U.S. trade deficit is not as bad as it looks in the first graph when the fact that the U.S. is a net exporter and the rise in GDP are taken into account. This is reflective of Levinson's point of the U.S. becoming a service-oriented economy rather than a labor-intensive manufacturing one. In this sense, it does not necessarily seem bad if the U.S. has a trade deficit, because importing things such as clothes allows us to specialize in what we do best (i.e. capital intensive work). Why did the trade deficit drop during the recession of 2008? Why are we a net exporter of services and can you think of some examples?

See: FRED 3 view of trade deficit and NYT Charts

Ayub Herman & Jack Johnson

2 thoughts on “U.S. Trade Deficit

  1. patelp20

    The trade deficit dropped during the crisis because the United States imports and exports as a whole dropped. Basically we stopped importing as many things, but our exports rose since the dollar got weaker.

    As for the question of why we are a net exporter, that does not really make sense. I thought that we were actually a net importer, hence the budget deficit. We are a net importer (meaning we import more than we export) because many U.S. companies outsource production. Factories are not inclined to produce in the United States because of the high cost of labor, so instead US consumers get many of their goods from abroad. These goods made in other parts of the country are cheap, and since the dollar is stronger than the currencies of these places (such as Indonesia) we are able to consume goods made there (such as cheap silverware).


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