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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



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