Trade Deficit and Surplus

Thoughts on a Free Market Economy…
“Trade Deficit and Surplus”
By Phyllis Hunsinger
April 1, 2016

Any discussion of economic government policy will include terms such as trade deficit and trade surplus. What is meant by those terms?

A trade deficit occurs when the value of imported goods exceeds the value of exported goods. A trade surplus occurs when the value of a country’s exported goods exceeds the value of its imported goods. From these definitions it is easy to conclude that for any country to prosper there must be an overall trade surplus.

Last year, according to a February 19, 2016 report by Pat Buchanan in, China exported $482 Billion worth of goods to the United States, while the U.S. exported only $116 Billion in goods to China. This resulted in the largest trade surplus in history for the Chinese, at the expense of the U.S. Included also in this report was the historical trend for the U.S: In 1985, China’s trade surplus with the U.S. was $6 Million; by 1992, the trade surplus was $10 Billion. In 2002, China’s trade surplus with the U.S. was in excess of $100 Billion and in 2005, the trade surplus had advanced to $200 Billion. And this is just with China.

The total U.S. trade deficit in 2015, cited by the above report, was $736 Billion. What does this mean for the citizens of the United States?

Free trade, a topic discussed in the March 1, 2016 FREE Foundation blog, allows for the free flow of goods from country to country. This creates a true imbalance because of the wages, health and safety regulations, and economic restrictions on American manufacturers and their employees. So when American manufacturers send their manufacturing out of the country, left behind are workers whose jobs and futures leave the country as well. The warehouses often sit empty contributing to the death of small towns and rising unemployment across America. The argument that free trade produces lower prices may also be met with the fact that unemployed citizens have no money to spend.

Understanding the ramifications of free trade, trade deficits, and trade surpluses is critical. The very economic health of America and its citizens depend on understanding these important concepts. Each voting citizen needs to hold their elected representatives accountable for understanding these economic concepts and for making policies that will serve the economic interests of the United States’ citizens., Phyllis Hunsinger © 2013 All Rights Reserved

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