Trade deficits and surpluses

The Impact of Trade Deficits on an Economy

The trade deficits and surpluses of an economy determine how it manages its imports and exports. Trade deficits occur when an economy’s imports exceed its exports. As a result, when there are trade deficits, tighter regulations on foreign trade imports may be necessary. In addition, existing agreements may be evaluated to ensure that they are in the best interests of the United States. Imported goods from certain nations may be subject to additional taxes and tariffs. Such trade agreements can be negotiated with administrations that have a strong focus on overseas trade.

The Implications of Surpluses

Surpluses are another type of deficit that arise when commodities exported exceed those imported. Since there will be other outputs, the United States government may then have to purchase more of the treasury shares in a bid to bring down the inflation of the country. The effect will be less money in the economy forcing households to have more purchasing power and starting new businesses thus increasing the country’s GDP.

The Role of Deficits in Stimulating the Economy

Deficits may push the government to have more stimulus package and put in more money into the economy to cover the gaps and enhance the effectiveness of local companies to borrow and increase productivity. However, in the U.S. this has not been the usual case over the last five years and from the look of things, it does not seem to be an issue even in the coming five years. Therefore, most probably, as a transportation firm in the U.S., by remaining in the U.S., we will likely suffer from lack of enhanced productivity and efficiency.