US Trade Deficit

Explain what the US Trade Deficit is. Why did it go down in December 2007? What does the value of the US dollar have to do with the trade deficit falling? Why do you think that a large trade deficit is bad for the economy? In other words: why is it bad to import more goods than you export?


The U.S. trade deficit sounds like a difficult term to grasp, but it really isn't. When a nation exports and imports goods equally, their trading is balanced. The reason why the word "deficit" follows U.S. trading is because we import goods far more than we export. We would have a surplus if we began exporting more goods than we imported. Simple enough?

Recently, the US has faced a giant deficit when imports began exceeding export by nearly 58 billion dollars! In Dec. of 2007, we exported $144 billion dollars in goods and imported 203 billion dollars in goods! If you can't do the math, that's a 59 billion dollar difference. As a result, the value of the US dollar is falling and foreign buyers are now interested in purchasing more of America's cheap products. This sudden surge is responsible for the increase of expots of US goods overseas.

Naturally, a trade deficit has negative impacts. It would be best for a country to always export more than they import, causing the public to stamp surplus in our trading markets. And of course, surplus is a nice word.