An Overview of the US Trade Data

1. An Overview of the US Trade Data tananet.net/us-trade-data The US trade Data deficit is one of the largest components of the gross domestic product (GDP). A trade deficit is a difference between the value of imports and the value of exports. On the one hand, US imports are always larger than exports. Hence, the country has to undertake significant monetary and fiscal adjustments in order to gain access to the foreign exchange market and raise its share in the world economy. The role of the US in the global free trade system A key role has been played by the US in the formation of the global free trade system. In particular, the US has played a major role in the introduction of the General Agreement on Tariffs and Trade (GAT) and the North American Free Trade Area (NAFTA). The European Union and Japan are the two major members of the free trade area. Both of them have implemented free trade policies, but have had to undertake compensations in terms of some of their advantages. On the other hand, the US has not yet implemented free trade policy, but it has implemented a tariff structure on imports and exports to boost the economic growth of the country. The growth of the US economy is primarily dependent on its use of domestic resources and foreign investments. For this purpose, the country needs to expand its internal market and infuse funds into the productive sectors. The most important aspect of this policy is the balance of trade. Balance of trade is related to the extent to which domestic goods are exploited in relation to the extent to which foreign goods are imported. This means that if domestic products are more productive than foreign products and domestic exports are more profitable than imports, then the domestic balance of trade is positive and vice versa. Understand the relationship between the trade deficit and the US economy To understand the relationship between trade deficits and the strength of the US economy, an understanding of the nature of the international trade flows is required. Basically, trade flows are classified into two categories-fiscal trade and direct trade. Fiscal trade refers to the financial transactions between the domestic economy and its external trading partners. Direct trade refers to the trade that takes place between a domestic economy and its trading partners. Exports and imports are the two leading sources of fiscal imbalance. One important indicator of the strength of the US economy is the surplus trade deficit. The surplus trade deficit indicates the difference between the actual export value and the value of the export allowance. Because of the surplus, the US economy is prevented from 1/2

2. over exporting, which results in a drop in the foreign asset holdings. The net imports imply a decline in the foreign assets held by the country. This implies that a low value of domestic assets held by the country implies a low level of foreign liabilities. US economy is dependent on its foreign trade partners for its ongoing prosperity and advancement. With the current downward trend in the GDP, it is imperative for the US government to address the imbalances on its own. However, this will only be possible if the US decides to play the role of a trusted partner, rather than a trading partner. A US trade deficit may not seem like a significant issue but a large US trade deficit will adversely affect the overall economic performance of the country. Thus, it is essential for the US to maintain its good relationship with its trading partners and continue to enjoy the benefits of a flourishing free trade environment. One can easily purchase the US trade data from various firms like importkey.com. 2/2