US Trade Deficit

Explain what the US Trade Deficit is. Why did it go down in December 2007? What does the value of the US dollar have to do with the trade deficit falling? Why do you think that a large trade deficit is bad for the economy? In other words: why is it bad to import more goods than you export?

A trade deficit is a calculation of the difference between the goods and services Americans sell to foreigners and the goods and services that Americans purchase from foreigners. This deficit is calculated on an annual basis so every 1st January of the year it is $0.00. When the country imports, we have to pay, but we get paid when exporting. When importing surpasses exporting it is known as a deficit. In December 2007 in the U.S., imports exceeded exports by about $58 billion. The value of the US dollar has to do with the trade deficit falling because the lower the value is, the cheaper it is for other countries to buy goods from us. It is bad for the economy to import more goods than to export because when exporting, the US makes money from the buyers in other countries and it means that it is helping our economy. When importing goods, we lose money and are dependent of the goods that another country can provide for us.