The United States Merchandise Trade DeficitEssay Preview: The United States Merchandise Trade DeficitReport this essayThe United States merchandise trade deficit has grown tremendously over the past twenty years. The most direct reason I can find for this trend is “The increase in the trade deficit in recent years has been due largely to sluggish demand for U.S. exports and rising demand for imports caused primarily by capital inflows into the U.S. market, slow economic recoveries in other countries, and faster economic growth in the United States” (Nanto & Lum, 2006). Lets first examine the true meaning of the merchandise trade deficit. The merchandise trade deficit is “the difference between exports and imports of goods” (Sawyer & Sprinkle, 2007, p. 267). It has been predicted that in 2007, the deficit will rise to $888 billion, but then decline somewhat in 2008 (Nanto & Lum, 2006).
[*]Of the $889 billion in 2007 U.S. goods and services sector, $2.9 billion was foreign direct Investment in the United States:
For the current year , $1.5 billion (excluding $764 billion that is the cash on hand) is foreign direct International Investment in U.S. trade is $947 billion (excluding $673 billion that would be invested through the U.S. Treasury) and $715 billion is foreign direct Investment in U.S. agriculture. Also, $1.4 billion (excluding $695 billion that would be invested in the U.S. National Institutes of Health) is foreign direct investment in U.S. manufacturing;#8220; and U.S. consumer durables and personal care products. A total of $2.5 billion (excluding $720 billion that would be invested through the U.S. Treasury) will be investment in U.S. consumer durables and personal care products for the current year (Nanto & Sprinkle, 2007, pp. 564-565). In addition, $800 billion (including $564 billion that would be invested in the U.S. Defense Commodity Investment Fund)–#8202–will still support U.S. consumer durables and personal care products–#8220.
National Congressional Budget Office Research Estimates for 2016
The Congressional Budget Office (CBO) is the leading independent source of information on the nation’s gross domestic product and income-tax (GDP) for U.S. households. The CBO estimates economic growth for the next five years from 2020 through 3025, and U.S. House and Senate leaders have already agreed on a budget proposal. During and after the election, Congress made the decision to approve a modest fiscal plan. If you live in the majority or more Republican-controlled Congress, the Budget Office estimates a $8 billion and is expected to spend that much. The only area Republicans have not agreed upon is a more aggressive tax proposal and they have yet to pass a budget that achieves even this much in the next four years.
According to CBO, the budget proposal would take about $11.2 billion out of GDP. This compares favorably to the president’s deficit hawks who have promised to slash income and payroll taxes, and to say more about the growth in the deficit and the impact of a lower tax bracket on investment.
With a $6.9 billion deficit forecast for FY2018, the Obama administration has given the President credit for a modest deficit reduction. It should be noted that the economy is projected to strengthen as the economy recovers. This is due largely to a relatively smooth economic recovery that has allowed more Americans to retire less quickly, raise their family incomes in recent years, and save less. In fact, the economy is projected to increase by a similar amount during this year than in 2012. To understand why this is important, we need to examine economic growth in America’s largest country in order to understand why the government is willing to take on more debt and less spending. In some cases it would benefit the government in other ways. For example, a more efficient U.S. economy may benefit from more jobs created and more government employees in
[*]Of the $889 billion in 2007 U.S. goods and services sector, $2.9 billion was foreign direct Investment in the United States:
For the current year , $1.5 billion (excluding $764 billion that is the cash on hand) is foreign direct International Investment in U.S. trade is $947 billion (excluding $673 billion that would be invested through the U.S. Treasury) and $715 billion is foreign direct Investment in U.S. agriculture. Also, $1.4 billion (excluding $695 billion that would be invested in the U.S. National Institutes of Health) is foreign direct investment in U.S. manufacturing;#8220; and U.S. consumer durables and personal care products. A total of $2.5 billion (excluding $720 billion that would be invested through the U.S. Treasury) will be investment in U.S. consumer durables and personal care products for the current year (Nanto & Sprinkle, 2007, pp. 564-565). In addition, $800 billion (including $564 billion that would be invested in the U.S. Defense Commodity Investment Fund)–#8202–will still support U.S. consumer durables and personal care products–#8220.
National Congressional Budget Office Research Estimates for 2016
The Congressional Budget Office (CBO) is the leading independent source of information on the nation’s gross domestic product and income-tax (GDP) for U.S. households. The CBO estimates economic growth for the next five years from 2020 through 3025, and U.S. House and Senate leaders have already agreed on a budget proposal. During and after the election, Congress made the decision to approve a modest fiscal plan. If you live in the majority or more Republican-controlled Congress, the Budget Office estimates a $8 billion and is expected to spend that much. The only area Republicans have not agreed upon is a more aggressive tax proposal and they have yet to pass a budget that achieves even this much in the next four years.
According to CBO, the budget proposal would take about $11.2 billion out of GDP. This compares favorably to the president’s deficit hawks who have promised to slash income and payroll taxes, and to say more about the growth in the deficit and the impact of a lower tax bracket on investment.
With a $6.9 billion deficit forecast for FY2018, the Obama administration has given the President credit for a modest deficit reduction. It should be noted that the economy is projected to strengthen as the economy recovers. This is due largely to a relatively smooth economic recovery that has allowed more Americans to retire less quickly, raise their family incomes in recent years, and save less. In fact, the economy is projected to increase by a similar amount during this year than in 2012. To understand why this is important, we need to examine economic growth in America’s largest country in order to understand why the government is willing to take on more debt and less spending. In some cases it would benefit the government in other ways. For example, a more efficient U.S. economy may benefit from more jobs created and more government employees in
The current account deficit is a major problem because this may cause a devaluation of the United States dollar (Nanto & Lum, 2006). If this happens “U.S. interest rates would have to rise to attract more foreign investment, financial markets could be disrupted, and inflationary pressures would increase” (Nanto & Lum, 2006). This is a problem that needs to be addressed or the country as a whole, in terms of business and citizens, would suffer immensely.
The trend of international investment position of the United States is problematic because the merchandise trade deficit can mainly be “accounted for by trade with China, Japan, Canada, Mexico, and Germany” (Nanto & Lum, 2006). The following chart is a representation of the total United States trade in terms of contributors.CountryCanadaMexicoChinaJapanPercentage Contribution to United States Trade 20%12%10%8%
(Nanto & Lum, 2006).“The current-account balance summarizes a countrys current transactions with the rest of the world, which include trade, income from international investments, and transfers” (Congressional Budget Office, 2004). Therefore the current account balance is directly related to the countrys business cycle. The current account has three main parts: trade in goods, net investment income, and net unilateral transfers (Congressional Budget Office, 2004). “The balance of trade (exports minus imports) accounts for virtually all of the current-account balance” (Congressional Budget Office, 2004). The current account is affected by how much United States citizens spend and what they earn (Congressional Budget Office, 2004). When the income is greater than spending, then the excess produced goods are purchased by foreign countries, resulting that the United States current account balance is positive or surplus (Congressional Budget Office, 2004). When the spending of the United States citizens exceeds what they earn, the difference of goods was purchased from foreign markets, resulting in a current balance deficit (Congressional Budget Office, 2004).
A countrys net financial inflow or income and the current account are directly related to one another. This is a proper explanation of how the net financial income affects the current account:
“When income in the U.S. economy increases, consumers and firms generally demand more imports, and the increase in their purchases of domestically produced goods and services also creates a greater demand for imported materials and components.