What are the benefits of the US trade data? The answers to this question depend on how you choose to look at it. The simple answer is the stronger the US economy becomes, the more international demand is boosted for the dollar-denominated goods. In turn, this strengthens the dollar as the dollar’s strength is translated into stronger export rates. The basic equation then is support for dollar strength = support for dollar weakness.
The US trade deficit is a complex and important economic indicator. The current level of US trade data surplus is about 2.5 trillion dollars. That’s an awful lot of money! Each month’s buying target is now seasonally adjusted for the corresponding month of the past year. That way, note that merely pruning the yearly commitment to a six-month-long average is for illustrative purposes only. If you truly want to understand the full relationship between the strength of the US economy and its ability to preeminently absorb its own trade deficit, you must drill down to the very basics – to dollars.
The balance of trade as a measure of trade flows
Let us start with the balance of trade (BOT) as a measure of trade flows. BOT essentially sums up all direct and indirect imports and exports by both countries. For instance, let us take the import of goods into the United States from Canada and Mexico. This would include the purchases of automobiles, trucks, non-defense business equipment, and goods such as fruits and vegetables. This flow of transactions is then reflected in the current account and the gross domestic product (GDP).
The second fundamental economic indicator we should consider is the difference between actual exports and imports. The net exports minus imports are calling the exportation deficit. Another way of saying it is the difference between merchandise imports and exports. The strength of the US dollar has significantly affected the level of this surplus or deficit.
Looking at the direction of the US economy, we can see that the trade deficit is sensitive to changing interest rates, consumer sentiment, inflation, and other economic variables. These factors have major effects on both exports and imports. For instance, if there is a marked rise in the interest rates, the buying power of the dollar drops. This would directly lead to an increase in imports or, conversely, an increase in exports.
Important determinant of the performance of the US economy
An important determinant of the performance of the US economy is its relation with its trading partner, the customs. The US is a major creditor in the foreign exchange market and relies heavily on its stable relationship with the customs. The two parties have a common interest in seeing that the trade deficit is reduced. On the one hand, they face a problem when their mutual tariff schedules are not compatible and, on the other hand, the mutual trust and confidence between the two parties are threatened by the occurrence of trade complications.
The Two Sides Have A Common Interest
In other words, the two sides have a common interest in reducing the current surplus or deficit and the commitment on the part of the US to reduce the current deficit. This can only be done through a renewed commitment on the part of the US authorities to pursue a path of economic liberalization. A commitment to further openness can be seen as manifested in the recently concluded Trade Act. The US administration justified its decision to adopt this approach by arguing that it was important to promote economic stability in the context of global trade. Further growth of the US economy is only possible when it promotes trade liberalization and takes a leading role in international trade.
The second phase of the economic debate focuses on trade remedies. The reduction in the trade deficit is likely to result in some adverse effects on import and export statistics. However, the administration has an opportunity to take a balanced approach to these issues. There are two options for addressing the impact of the reduction in the surplus on goods exports. The first option is to focus on preserving the competitiveness of the domestic industry by enhancing training opportunities, innovation, and R&D. To purchase the US trade data one can simply check out websites like importkey.com.
