Essay describes the Economic causes and effects of the current US trade defecit on the lives of americans short term and long term(2004)

Essay by omakjojo123High School, 11th gradeA, April 2005

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U.S. Trade Deficit

Since World War II, The United States established agreements with nations across the world to eliminate barriers to international trade and investment. The benefits of free trade had opened up for the American public, and this was reflected in a long string of years when U.S exports exceeded imports. With the devastating effects of war on the rest of the world, the U.S had no fear of international competition, and much to benefit from free trade. However positive the situation was looked for the U.S., after 1970 imports began exceeding exports, meaning the U.S. had trade deficits. The public believed that the international trade deficits would have negative economic effects, such as unemployment and slow economic growth. Some believed that the deficits arose from unfair trading policies, which lead to import restrictions and other changes to eliminate the deficits(Griswald). However, the deficits were not caused by foreign or U.S

trade polices, but by the balances between saving and investment in the United States and in other countries and the effects of those balances on international flows of capital investment. Soon after the turn of the new year, on the 12th of January 2005, the U.S reached a record trade deficit of $60 billion (Evans). The question of whether the U.S. trade deficit should be allowed to continue to grow is in debate across the world. The heavy trade deficit problem is proving to be a heavy burden in the long term because the dollar may eventually free fall, interest rates will rise greatly, and the standard of living in the US will fall greatly.

At present, 17% of the country's annual budget being used to pay the interest on international trade deficits (Hamilton), and 22% of the nation's Gross Domestic Product (GDP) used to cover the trade...