Introduction
Trade balance refers to an ideal situation where a country’s imports and export are equal. In real life situations, it is difficult to attain this balance, resulting into either a deficit or a surplus. In cases where a country’s imports are higher than its exports, a situation of trade deficit or trade gap occurs. It has been observed that, the U S economy is in a crisis of financial equities resulting into a situation of trade deficit. Certainly, the US economy requires the employment of “forward momentum” like tax cuts among others. By so doing, it is anticipated that, in the next two years, the US economy would improve resulting into a corrected balance of trade. More so, this process of recovery from recession is expected to take longer, as the economic trends are observed to reinstate slowly due to the acuity of the recession in the year 2008 (Amadeo, 2010).
United States Trade Deficit Trends from the Recession era
Generally, the United States trade deficit increased in the first half of 2008 from 59 000 in January to 66 000 US dollars in July. It then reduced to 41 000 US dollars by December the same year; being a real reflection that, the country was able to increase its exports while reducing imports and hence the improvement. In 2009, the country managed to maintain a low trade deficit of $37 000 in spite of fluctuations within the year. This year, the country started off at a relatively lower trade deficit of $ 34 000 in January. Six months afterwards, this deficit increased to $ 50 000 in June; where it later started decreasing significantly up to $ 38 000 in October this year (USCB, 2010).
It has been observed that, unemployment rate has been observed to fall by 0.4% in years with deficits while it rose by an equivalent percentage in years with shrinking deficits. Whenever the trade deficit increased in the last 25 years, the u s economy grew by 3.5 per cent as opposed to growth of 2.6 per cent in years when the deficit shrank. Therefore, an increasing trade deficit is a pointer to a strong economy (Amadeo, 2010).
The Future of the US Trade deficit
The future of the US trade deficit has been observed to take the course of the normal business cycle. It has been observed that, during the recession period, trade deficits were relatively higher than during the time of recovery. Though during the recovery period the trade deficit seems to decline sub-sequentially, there seem to be no promising potential expansion phase in the near future. This is an implication that, the US trade deficit would just decline slowly until, full expansion phase is realized. This is anticipated to be in the next five years to come (USCB, 2010).
Conclusion
It should be noted that, the US economy has been recovering from recession period from the year 2009 up to date, with its trade deficit declining significantly. Various Acts like the Investment Act devised by the government to reduce the trade deficit have been employed. Though the economic situation in the country seems promising, the expansion phase may not be realized as urgently as many may think, though within the period of 5 years from now the economy is anticipated to be at expansion phase. This would then be marked and characterized by balanced trade balance or trade surplus in the country.
References
Amadeo, K. (2010). The US Trade Deficit.
United States Census Bureau (USCB) (2010) United States Balance of Trade.