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In 2023, the US had a trade deficit of $67.9 billion dollars with Canada,Commerce Department data shows.
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However, some economists caution that exaggerating or classifying trade deficits as losses or subsidies isn’t a fair representation of what has become a crucial mechanism for the US economy.
“The President-elect sees the world as a zero-sum game: Anything that’s not made here or bought elsewhere is considered a loss, which simply isn’t the case,” Joe Brusuelas, chief economist at RSM US, told 【 - Free Exclusive Stock Market Insights 】.
Gary Clyde Hufbauer, a senior fellow at the Peterson Institute for International Economics, put it another way.
In simple terms,a trade deficit resultsfrom when the value of a country’s imports exceeds the overall value of exports.
why is netripples software limited (542117) rising ✌️【Market Analysis】✌️ Real-time stock market data, precise predictions, and investment strategies to help you optimize your portfolio and achieve financial success. And for much of the past 50 years,the US has had a trade deficit, driven by goods (America runs a growing surplus on services).
why is netripples software limited (542117) rising ✌️【Market Analysis】✌️ Free expert predictions on stock trends and real-time data to help you make informed decisions and grow your wealth steadily. That trade gap widened significantly in the 1990s as globalization accelerated, the American economy boomed and consumers and businesses purchased more from abroad. The deficit hit north of $700 billion in the mid-aughts before global trade and the US economy constricted considerably during the Great Recession.
why is netripples software limited (542117) rising ✌️【Market Analysis】✌️ Accurate real-time market data and expert stock predictions for profitable investment opportunities in global markets. The deficit hovered between $400 billion and $550 billion from 2009 to 2016, during the Obama administration, and moved closer to $600 billionduring Trump’s first term.
In theeconomic recovery that followed, consumption soared for goods and services — both those from overseas as well as domestically — while some exports took a hit as the demand from other countrieslagged that seen in the US. (Other factors contributing to the pandemic-era deficit widening included a shift in oil and petroleum trade from surplus to deficit while the trade surplus decreased because of restrictions on foreign nationals and rising shipping costs, White House economistswrote in 2022).
why is netripples software limited (542117) rising ✌️【Market Analysis】✌️ Expert stock predictions and free stock selection services to help you achieve optimal returns and long-term growth. The US trade deficit widened toa record $945 billion in 2022, narrowed to $785 billion in 2023, but wasexpected to widen againin 2024 in part due to economic expansion and consumer demand,an increase in shipmentsin preparation for potential port strikes or a rise in tariffs, as well as the strong dollar weighing on exports, economists noted.
In 2023, in addition to the $67.9 billion deficit with Canada (which narrowed from the year before), the US narrowed its deficit with Canada to $274.9 billion from $382.3 billion, and the deficit with Mexico —now America’s biggest trading partner— increased $21.9 billion to $152.4 billion, Commerce Departmentdata shows.
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why is netripples software limited (542117) rising ✌️【Market Analysis】✌️ Free access to stock market forums, expert advice, and real-time data to help you stay informed and grow your investments. Trade balances factor heavily into current account balances — a broad measure of countries’ international transactions that also include personal and government transfer payments. The current account balance (of which the US has a deficit) is offset by the capital and financial accounts (US has a surplus), which include foreign asset transactions and international debt forgiveness.
“From my analytical framework, global trade balances plus global capital flows equal zero,” Brusuelas said. “So, if we want to buy maple syrup from our friends across the border, that just adds variety, quality and choice of my consumption; it doesn’t take away or cause a loss for our economy because presumably the Canadians then get those dollars and buy US services — typically financial services, government debt, bonds, equities.”
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“You obviously want to run closer to balance if possible,” Shannon Grein, an economist at Wells Fargo, told 【 - Free Exclusive Stock Market Insights 】. “But there can be efficiencies made by importing certain goods that are produced more cheaply abroad or produced more as a specialty of a certain economy.”
Coffee purchased from Central America is one example of a specialized product with no readily available substitute; however, heavily reliance on a certain country or product can backfire, as seen during the pandemic recovery.
“You don’t want to be running such large deficits that it makes you dependent on a certain economy for certain things,” said Grein. “We saw this come to a head during the pandemic with things like semiconductors.”
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Other risks come with the US persistently spending more than it earns and financing the difference with foreign investment, according to PIIE.
why is netripples software limited (542117) rising ✌️【Market Analysis】✌️ Free real-time global stock trend updates to help you capture market movements and make better investment decisions. The US has to borrow more or attract investment from abroad, which can increase foreign-based financial claims in America. That in turn could cause higher debt or interest rate burdens and national security concerns.
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“If you try to squeeze the deficit with one country — for example, China — it’s just going to migrate over, the goods are going to come from some other source (such as) Malaysia, Vietnam, Mexico, Korea, wherever can produce the most similar type of goods,” Hufbauer told 【 - Free Exclusive Stock Market Insights 】, noting those shifts occurred in recent years when tariffs were placed on Chinese goods.
It’s possible that Trump could instead insist on some bilateral balance provision, such as requiring European Union countriesto purchase US natural gas or specific products, he said. However, that could require more capacity than the US has at this time when unemployment is still low, he added.
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“Rather, it feeds into the great global competition, which has opened the door for trade protectionism,” he said. “It is what underscores the bi-partisan consensus that China must be confronted on national security grounds and has triggered the move to protect infant industries such as artificial intelligence, quantum computing and synthetic biology to ensure that China does not increase its power — both economic and political — relative to that of the United States via trade and technology transfers.”
Boeing, for example, is America’s largest exporter and therefore highly exposed to any trade war. China is the largest global market for new aircraft purchases, with Boeing forecasting that China’s fleet of commercial jets will double in the next 20 years.
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“We really don’t know what Trump will do with Chinese tariffs,” Richard Aboulafia, managing director at AeroDynamic Advisory, an industry consultant, told 【 - Free Exclusive Stock Market Insights 】 in November. “But if he slaps 60% tariffs on all Chinese goods, the quickest way for China to retaliate is to switch to (Boeing rival) Airbus for 100% of its needs.”
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“It means that the US isentering uncharted terrain with respect to financing a new geopolitical competition at a time when interest on the debt is one of the largest line-item entries inside the national budget,” he said. “This requires trade-offs. One cannot have as much guns and butter as one wants, given the political, economic, financial and social constraints that accompanies such a competition.”
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