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    Why Does The Us Have A Long Standing Trade Deficit? Can Anything Be Done To Turn This Around To A Trade Surplus?

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    Maurice Ashley Fanoga
    The US has experienced long-standing trade deficits for a few key reasons. It often imports raw materials and commodities that it lacks domestically to meet demand. Additionally, the US specializes in certain industries and exports fewer goods than it imports. While a trade deficit is not inherently negative, the Philippines has faced annual deficits due to importing many raw materials and intermediate goods to fuel its economy. However, an influx of foreign currency from trade can benefit an economy, as was the case for South Korea which invested heavily despite early deficits and later saw economic growth and trade surpluses.

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    Why Does The Us Have A Long Standing Trade Deficit? Can Anything Be Done To Turn This Around To A Trade Surplus?

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    Maurice Ashley Fanoga
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    The US has experienced long-standing trade deficits for a few key reasons. It often imports raw materials and commodities that it lacks domestically to meet demand. Additionally, the US specializes in certain industries and exports fewer goods than it imports. While a trade deficit is not inherently negative, the Philippines has faced annual deficits due to importing many raw materials and intermediate goods to fuel its economy. However, an influx of foreign currency from trade can benefit an economy, as was the case for South Korea which invested heavily despite early deficits and later saw economic growth and trade surpluses.

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    Trade Deficit

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    The US has experienced long-standing trade deficits for a few key reasons. It often imports raw materials and commodities that it lacks domestically to meet demand. Additionally, the US specializes in certain industries and exports fewer goods than it imports. While a trade deficit is not inherently negative, the Philippines has faced annual deficits due to importing many raw materials and intermediate goods to fuel its economy. However, an influx of foreign currency from trade can benefit an economy, as was the case for South Korea which invested heavily despite early deficits and later saw economic growth and trade surpluses.

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    8 views2 pages

    Why Does The Us Have A Long Standing Trade Deficit? Can Anything Be Done To Turn This Around To A Trade Surplus?

    Uploaded by

    Maurice Ashley Fanoga
    The US has experienced long-standing trade deficits for a few key reasons. It often imports raw materials and commodities that it lacks domestically to meet demand. Additionally, the US specializes in certain industries and exports fewer goods than it imports. While a trade deficit is not inherently negative, the Philippines has faced annual deficits due to importing many raw materials and intermediate goods to fuel its economy. However, an influx of foreign currency from trade can benefit an economy, as was the case for South Korea which invested heavily despite early deficits and later saw economic growth and trade surpluses.

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    of 2

    Why does the us have a long standing trade deficit?

    Can anything be done to turn this around to a


    trade surplus?

    It is often said that when a country's imports surpass its exports for a specific period of time, this
    is known as a trade deficit. A country might have a trade deficit for a variety of reasons, but the most
    common cause is that it is unable to produce enough commodities for its consumers and businesses. A
    country's natural resources, for example, may be limited, were necessitating the importation of raw
    materials such as lumber or oil to meet the country's demand for those commodities. It's also possible for
    a country to specialize in a certain product or industry. This indicates the idea that a mismatch between a
    country's savings and investment rates is the primary source of a trade deficit. On the other hand, due to
    significant imports of raw materials and intermediate goods, the country Philippines have been
    experiencing annual trade deficits.

    In today’s situation, exports fell unexpectedly in February, while imports increased for the first
    time in 21 months, according to Philippine trade data. As expected, exports fell 2.3 percent on the year,
    with modest advances in the primary semiconductor sector (0.4 percent) unable to overcome the 5.5
    percent drop in shipments to ASEAN partners for the month. After a nearly two-year lull, imports
    increased in most sectors, with raw materials (6.4 percent), capital goods (5.7 percent), and consumer
    products (5.7 percent) leading the way (3.9 percent ). With the economy still locked in recession during a
    protracted 12-month lockdown with daily Covid-19 infections increasing in March, the 2.7 percent uptick
    in imports may be more a product of base effects than a meaningful recovery for the industry. This means
    that the trade deficit remained small at $2.3 billion, much below the COVID-19 average of $2.9 billion,
    which has provided some support to the PHP since 2020. As a result of this data, an economy's trade
    deficit isn't always a bad thing. This shows that a deficit could indicate that a country's consumers are
    wealthy enough to buy more items than it produces. Meanwhile, a net inflow of domestic currency from
    overseas markets is referred to as a trade surplus. When the outcome of the aforementioned computation
    is negative, it is the total opposite of a trade deficit, which is a net outflow. This illustrates that a trade
    surplus is indicated by a positive value, whereas a trade deficit is indicated by a negative value.

    Some expert says that international commerce flows are the same as international financial capital
    flows since they invariably involve financial payments. In economic terms, whether it is a good idea for
    an economy to rely on net inflows of financial capital from abroad or to make net investments of financial
    capital from abroad is the same. However, borrowing money is generally thought to be a waste of money,
    and a cautious country, like a prudent person, should always rely on its own resources. While it is
    undoubtedly possible to borrow too much, as anyone with an overloaded credit card will attest, it is also
    feasible to borrow at specific moments when it is economically prudent. A policy of avoiding
    participation in financial capital markets has no economic benefit for both people and countries. One of
    the examples of this situation is the country of South Korea, which experienced trade deficits during
    much of the 1970 and was an importer of capital at that period. South Korea, on the other hand, invested
    heavily in physical plants and equipment, and its economy flourished at a rapid pace. They frequently
    experienced trade surpluses from the mid-1980s to the mid-1990s, implying that it was repaying its
    previous borrowings by exporting cash overseas. All in all, when a country has a trade deficit, it imports
    or buys more products and services from other countries than it exports or sells abroad. In contrast, when
    a country's exports outnumber its imports, it has a trade surplus.
    References:
    Mapa, Nicholas. “Philippines: Exports and Imports Rise Sharply but Trade Deficit Remains
    Manageable.” ING Think, ING Think, 9 June 2021, https://think.ing.com/snaps/philippines-
    exports-and-imports-rise-sharply-but-trade-deficit-remains-manageable.

    O'Neill, Aaron. “Philippines - Trade Balance 2020.” Statista, 11 Aug. 2021,


    https://www.statista.com/statistics/578821/trade-balance-of-philippines/.

    “Philippines Balance of TRADE2022 DATA: 2023 Forecast: 1957-2021 Historical.” Philippines


    Balance of Trade | 2022 Data | 2023 Forecast | 1957-2021 Historical,
    https://tradingeconomics.com/philippines/balance-of-trade.

    OpenStax. “23.5 The Pros and Cons of Trade Deficits and Surpluses.” Principles of Economics,
    OpenStax, https://opentextbc.ca/principlesofeconomics/chapter/23-5-the-pros-and-cons-of-trade-
    deficits-and-surpluses/.

    Segal, Troy. “What Is a Trade Deficit and What Effect Will It Have on the Stock Market?”
    Investopedia, Investopedia, 13 Sept. 2021, https://www.investopedia.com/ask/answers/trade-
    deficit-effects-on-stock-market/.

    Baylis, Kathy. “Why They Can't All Be Trade Surpluses • Farmdoc Daily.” Farmdoc Daily, 18
    Apr. 2018, https://farmdocdaily.illinois.edu/2018/04/why-they-cant-all-be-trade-surpluses.html.

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