Us Trade Deficit Assignment Report

Running head: US TRADE DEFICIT: A STUDY
US TRADE DEFICIT: A STUDY
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1US TRADE DEFICIT: A STUDY
Trade deficit can be defined as the amount by which the cost of a nation’s imports exceeds the
value of its imports during a given period of time. A trade deficit constitutes of an outflow of
domestic currency to the foreign market. Trade deficit also signifies a negative balance in trade,
where there is outflow without adequate income. The respective paper is a descriptive study of
trade deficit in the context of the United States of America. The paper scrutinizes, identifies and
evaluates the causes and reasons for trade deficit in America, its advantages or disadvantages, if
any, and how is the country coping with such issues in an all comprehensive and holistic manner.
Balance of Payment (also called BOP) is a mechanism where the nations of the world record
their trading activity. In the section of Balance of Payment, there is a sub section which is known
as current account that tracks goods and services that leaves exports and enters imports. The
current account also shows direct transfers like foreign trade, asset income from foreign direct
investment (FDI) as well as the Balance of Trade. Trade deficits occur when a nation fails to
produce enough goods for the residents of the country and therefore, they become obligated to
borrow goods and services from the foreign countries. However, in certain peculiar cases, a trade
deficit can also signify the wealth of a country, which means that the consumers of the country
are well-to-do enough to buy goods and services from outside the country.
According to the industrial and marketing statistics, in November of the year 2019 the trade gap
dropped 8.2 per cent to $ 43.1 billion and it is recorded as the smallest trade deficit the country
has witnessed since 2016 (Reuters.com., 2020). In case of US trade deficit that fell piercingly in
the November of 2019 for the second month in a row and also happened to sink the lowest in the
previous three consecutive years reflects a clear picture of decline of Chinese imports and the re-
emergence of the USA as energy powerhouse.

2US TRADE DEFICIT: A STUDY
The cause behind such decline of trade deficit in the USA is multidimensional and multilateral.
The overall trade deficit shrinking of the United States can be the effect of improvement of
American economy, soaring of domestic oil production and also the global trade war tactics the
country is about to head where the trading terms of America would be completely rewritten. An
increase in domestic oil production was a major factor in the process of shrinking of trade deficit
where the imports of foreign crude oil was cut down by $30.3 billion last year. Exports of civil
aircraft also decreased by $12.6 billion last year and the reason for such action can be traced
back to the fatal crash of the plane Boeing’s 737 MaxAirplane (Nytimes.com., 2020). However,
one of the major reasons for shrinking of trade deficit of the nation is targeting the country China
by the president of America, Mr. Donald Trump in terms of trade offenses. As America is
famous for sinophobia, therefore, such moves are not new for the globe. The trade deficits in
goods with China have dramatically shrank from $73.9 billion to $345.6 billion in 2019. It has
been considered as the first drop on an annual basis in the year 2016 because both the United
States and China placed tariffs on billions of dollars on each other’s products. Since both the
countries are facing some kind of political rivalry among themselves, American goods are not
encouraged in China and vice- versa. The US imports of China have certain unnecessary and
digressing restrictions. According to a group of Chinese scholars, the United States must supply
the right products at the right prices to make it possible for China to honor its commitment under
the recent trade deal that the US had with China. Nevertheless, many scholars speculate that
China does not have the capacity to purchase goods and services from the US as the nation
herself is going through an economic developmental phase. In particular, it can be noted that
American imports from China has sharply declined in the final two months of the year 2019 as
the companies worked to avoid tariffs that have been newly imposed by the government of the