How Much is Too Much?

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Economic growth fuels demand for imports, aggravating the trade deficit, which plummeted in the great recession as demand dwindled. Exports have faced headwinds even as the U.S. dollar has weakened.

How much trade deficit is too much trade deficit? It is difficult - if not impossible - to pinpoint the "correct" balance of trade. Today's trade report shows that the U.S. deficit got deeper, continuing a six-month trend. Exports grew but imports grew more. The relatively weaker dollar has helped exports. However, the accelerating economic growth in the U.S. coupled with tax cuts have given consumers more disposable income to spend. And U.S. consumers like to buy stuff from China. What most media outlets fail to report is that the U.S. has a trade surplus in services with China and the overall exports to China from the U.S. have grown over 500 percent from 2001-2016, the fastest of any export partner. Yes, some of China's trade policies need to be addressed. And if these negotiations succeed, U.S. business will be better off. However, it still may be a deficit. Please follow trade on page 46 of the Global Perspectives book.

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