What causes the US trade deficit

1. What causes the US trade deficit? ustradedata.weebly.com/blog/what-causes-the-us-trade-deficit The US Trade Data deficit is mainly caused by two sources: on the one hand, it is a result of the large volume of merchandise imported into the country; on the other, the large volume of merchandise exports means that there are certain deficiencies in the domestic production that, on the whole, reduce the volume of exports. The large trade deficit means that the country is losing potential earnings from its overseas investments. In order to address this problem, the US government has adopted different strategies over time. One such strategy is the "growing world" strategy, which emphasizes on increasing the foreign direct investment (FDI) in the United States. While the growing world strategy is expected to bring about a significant increase in the volume of US exports, the other strategy - reducing the deficit - has been considered a failure, at least until now. To examine the efficiency of the US economic system, it is important to study the relationship between the strength of the American dollar and the strength of the US economy as a whole. The US is the largest open market for goods in the world. Given this, the US currency is traded not only among its own nationals but among all major trading partners as well. This means that the US gross domestic product (GDP) is highly sensitive to changes in the value of the dollar. A strong dollar translates into low levels of exports and a high level of imports, creating a trade deficit and significant interest payments to its trading partners. 1/2

2. Why analysing trade flow is important? Analysis of trade flows reveals a close relationship between the strength of the US dollar and the balance of payments of its trading partners. For example, if the currency of one of your trading partners is weakening against the dollar, then your country's imports and exports are affected. The opposite is also true. The other major effect of the strength of the US dollar vis-a-vis its trading partners is its direct exposure to external debt. High levels of imports mean a higher level of external debt for the US. As a result, the country has to make interest payments to its creditors, which in turn have a significant impact on the overall health of the US economy. One of the objectives of the Bretton Woods system was to create a global system of international free trade. Though it failed completely in establishing a worldwide free- trade system, it did establish a system of global free trade by which most of the common goods - products that are produced in one country but traded internationally - are sold to other countries. By facilitating the flow of international trade, the Bretton Woods system was able to reduce the role of the US as a significant player in the global economy. Another important indicator of the direction in which the US economy is moving is its trade deficit. The US currently has a trade deficit with many of its trading partners. A high trade deficit means that the country is importing more than it is exporting. Net exports imply that imports exceed exports and net imports are the difference between the value of imports and the value of exports. A positive net international investment position implies that the country is exporting more than importing and a negative net international investment position indicates that the country is importing more than it is exporting. If you are looking forward to accessing the US trade data then you can simply check out websites like importkey.com. 2/2