The US President, Donald Trump, has always complained about the huge trade gap. He believes this is negative for America. By the way, the deficit reached $43.7 billion in July according to the Commerce Department. This is creating a lot of tension with China because the Asian country is the main source of the deficit. Is the trade gap too dangerous for America as some people believe? One of the reasons for this deficit is that America is a rich nation with high levels of consumption. Besides, the problem isn't as serious as it seems to be because the US economy is huge.
More information on the real size of the deficit
The Trump administration believes that by reducing the trade gap, there will be more jobs, and the economy will be stronger. Some economists share this way of thinking, but some disagree. America has a diversified economy; thus, it exports a lot. It also imports many Goods And Services because it has high levels of consumption. The deficit of goods is about $750 billion, but if we talk about goods and services, the gap falls to around $500 billion.
The US trade imbalance keeps growing
The trade gap is higher than the previous year because exports of chemicals, plastics, and other products fell. Sales to foreign markets related with aircraft parts, machinery, and other goods grew.
Anyway, the deficit increased in almost $28 billion, reaching more than $319 billion. We have to add that not all is negative, there are also many positive signs. The trade deficit in goods and services is just 2.7 percent of the economy, and it was five percent in 2006. This means that the trade imbalance is relatively small when compared with the Gross National Product.
China and Japan are the main sources
The sensitive trade deficit with China reached more than $33 billion last month. The US trade gap with the Asian country has been more than $204 billion until now. The Asian giant is the main source of the gap, and the next biggest deficit is with Japan. Many US politicians state that the Asians are using dumping policies to gain positions in The American market.
They also think that China has an undervalued currency to make its products cheaper.
Trump on NAFTA
The deficit with Mexico fell a lot, and it decreased from $6 billion to less than 5 billion. Donald Trump has complained a lot about the North American Free Trade Agreement, NAFTA. The US President believes that this agreement favors Mexico by promoting US companies to invest there.
