Problem
United States has large trade deficits with many countries. Discuss at least two reasons for the trade deficit. Note: Your discussion must be based on positive economic analysis. Avoid interjecting your own personal opinion.
The United States is an open economy: an economy that trades goods and services with other countries. In 2018, the United States ran a big trade deficit - that is, the value of the goods and services U.S. residents bought from the rest of the world was a lot larger than the value of the goods and services U.S. producers sold to customers abroad. Meanwhile, some other countries were in the opposite position, selling much more to foreigners than they bought (Hrugman & Wells, 2020)
One of the biggest reasons for the U.S. to encounter a big trade deficit is due to the strength of our currency. If the strength of the U.S. dollar decreases and other currencies strength increase, there would be a higher demand for U.S. products. When the opposite occurs; which is more often than not. U.S. products become too expensive for other countries to consume, therefore it triggers a trade deficit.
According to the U.S. Census Bureau, consumer products are the primary drivers of the trade deficit. In 2021, the U.S. imported nearly $2.9 trillion in consumer goods while exporting nearly $1.8 trillion. That created a $1.1 trillion goods deficit and is the highest goods deficit on record.
Krugman, P., & Wells, R. (2020). Macroeconomics (6th ed.). Macmillan Higher Education.
U.S. Census Bureau. "Annual 2021 Press Highlights."