Implications of the US Trade Deficit  

The US has been in trade negotiations with different countries for a while now. Surprisingly, the result of these negotiations is that the United States has a high trade deficit. The highest recorded trade deficit was $762 billion back in 2006. Since then, the deficit has been decreasing as US exports are growing faster than the country’s imports. To further understand why the United States have higher imports than exports, one need to know what kind of products are being traded and who the United States is trading with. Also, it should be noted that there are implications that the trade deficit would do to the country.

The United States’ biggest imports are consumer products and automobiles. These two are the driving force of United States’ trade deficit. The United States imported $934 billion in generic drugs, televisions, clothing, automobiles, and automobile parts. It only exported $344 billion which added $597 billion to the trade deficit. In the bright side, petroleum has been a commodity that has dropped in importation. The United States imported $144 billion in petroleum in 2016. A significant drop since 2012 wherein the United States imported $313 billion. This is because of the shale oil fields that are being developed today by the United States. However, the United States is still in a trade deficit in terms of petroleum because the country only exported $81 billion. This means a $73 billion contribution to the trade deficit. In terms of exports, The United States major exports are services. These services come in the form of intellectual properties, travel services, computers and business services, and financial and insurance services. In total, the United States exported $750 billion in services while importing $502 billion. This made a trade surplus of $248 billion.

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In all of the United States’ trades, China is its major trade partner. China is followed by Canada, then Mexico. The United States’ trade deficit with China reached $347 billion. Trades between the United States and China are about 70 percent of the total United States deficits. China has played a big role in the trade deficit the United States is facing today.

An ongoing trade deficit could never be good to a great power like the United States. Having a trade deficit is like having a tab at a bar. The United States can keep buying products because its trading partners keep on lending money. Trust between trading partners is important for a country to continuously trade with a trade deficit. For example, Japan has a trade deficit with China of about $36 billion. Issues between countries could not be good in terms of business. With the recent incident of APA CEO Toshio Motoya about the Rape of Nanking, this event could strike on the trust of China with Japan. And when the bartender loses its trust on you in ordering drinks and just putting it on your tab, the bartender would opt to make you pay for all of the drinks that you have bought. This is the same for two countries in constant trade. Another concern that the United States considers in terms of trade deficit is the competitiveness of the United States economy. The United States may lose its competitiveness with prolonged importing of goods in the sense that the country might lose its expertise in making products. One reason why the United States are importing consumer goods is that manufacturing them locally costs much more.

Local companies tend to send their raw materials to countries like China where manufacturing costs are low and just import back finished products to sell. This means that factories in the United States are closing because they cannot compete with the pricing of outsourced manufacturing. With the closing of these factories, Americans lose their jobs thus, experts no longer practice their craft and the knowledge and craftsmanship are not passed on.

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The United States might not be able to lessen the trade deficit in the near future because of the competitive Chinese companies. However, the government has now promised to lower trade deficits with China. The government looks to impose duties in Chinese trades. Also, the American consumers should also patronize on its locally manufactured products even if it costs higher than that of imported products from China.