Understanding The US Trade Data

1. Understanding The US Trade Data trade-data.weebly.com/blog/understanding-the-us-trade-data There has been a lot of talk about the US trade deficit with the Chinese. The US has been complaining to the Chinese that they are buying US goods at a cheaper price than they are selling them. Many economists think this is because the Chinese government feels that they can buy the US debt and get it back at a much lower rate than the current market value. There is also a possibility that China is dumping its goods onto the US without the necessary permit. These actions could be causing the current large US trade data deficit. So, the question remains. Does this cause the trade deficit to continue? And if it does why is there no reaction from the Chinese government or their partners in the World Trade Organization? One possible reason could be that they are taking advantage of a situation where they have excess domestic assets that they want to get rid of quickly. Another possibility is that the Chinese simply don't understand the US free trade agreement and the implications that it provides for their country. There are two main elements in all trade agreements One deals with the type of goods that are allowed to be exported. The other deals with the quantity of goods that are allowed to be exported. Usually both elements are present but sometimes one affects the other. Sometimes the Chinese will engage in direct trade with the US but will not allow these goods to be exported when it doesn't make economic sense for them to do so. The fact that exports and imports are both very important for the US economy means that they are two of the most important factors that determine the state of US trade data. Exports are valued by the buyer, meaning that they are either sold or purchased. Imports mean that the buyer is taking the goods that are being imported and bringing them back to the US. This brings us to the second point made above. Some economists debate whether or not there is much value lost when a country sells its goods and imports others. The argument goes something like this: Since the country is selling its goods and importing others, then the country must be making more money than it is spending. Some international trade agreements do allow for an import quota. In turn, the US may have certain advantages because it has significantly increased its exports over the past few years. This leads to the final fact that is the size of the goods trade deficit If exports are valued equally then the trade deficit is equal to the annual consumption. However, when the US has a low surplus and high import costs, then imports create a deficit. At this point the balance of trade needs to be made between exports and imports. A large current account deficit results from a combination of poor domestic growth and bad international trade policies. This can be used by economists as an illustration of why the US should take a harder line on trying to increase its exports. If the trade deficit is too large, US companies will suffer 1/2

2. because of the lower value of the dollar against their currencies. In addition, US consumers will feel the pinch as they try to buy more US goods because their budget will be eaten up. If this happens, then the demand for dollars from other countries, particularly from the fast-growing Asian markets, drops sharply. These are just a few of the consequences of a persistently high deficit. This suggests that the first step for the US economy to take is to correct the imbalances caused by the current global economic slowdown. One way of doing that is by increasing the value of exports, which should reduce the trade deficit, while reducing imports. Another important way is by ensuring that current and future consumption patterns are determined before starting the process of re-diversification. Both of these things should make the US economy more competitive in the future. This will help the US continue to enjoy its present level of economic growth and avoid future recessions. To purchase the best US trade data one can simply checkout websites like importkey.com. 2/2