Neel Mr.

Lyall Economics 29/10/2013

Economics Report
Research Question: What has the American economy done to try and balance its trade deficit? The American economy has been in a trade deficit for quite a considerable amount on time now but just now recently the trade deficit in June 2013 had decreased. By the American economy I mean the government and all of its factors which make the U.S. one of the wealthiest nations in the world. One of the 6 Government aims is External Equilibrium which has to do with imports and exports. A trade deficit is when the imports of a country are greater that its exports. In this report I will find out what the American economy has done to try and reduce it. The U.S. trade deficit in May was $44.1 billion which is a very sizeable amount but it decreased for that number to $34.2 billion. This level of the trade deficit is the lowest it has been for around 3 years. This is a 22.4% decrease. This amazing decrease was to do with the exports increasing and imports decreasing. According to the article I chose, the U.S. exports reached a record high of $191 billion in June, this was a straight increase from $187.1 billion in May (nytimes.com). Also the imports decreased from $232.1 billion in May to $225.2 billion in June. This meant that the U.S. was reaching more competitive prices worldwide as more countries were buying from the U.S. than they used to before at that time. A decrease in the imports also meant that the U.S. was getting fewer goods from abroad and it was using its own productions to a greater extent. Because of this less money was going from the Government to pay for the imports and more it was being used for its other economic aims. The decrease of the trade deficit directly impacts economic growth as well because the money this is being saved by the government can be used to produce more things which helps increase the overall economic growth. The article says because of the decrease in the trade deficit the growth went up to 1.7% and then even further to a calculated growth of 2.5% in July. Also, another reason for the increase in growth is how the American economy increased the exports. More exports meant that there were more units being sold abroad which meant more money was coming in which was used to increase growth. So if the U.S. economy increased its exports even more the economic growth would increase as well. That is how the growth for July was predicted. It meant that if the economy kept increasing exports at the same rate the growth would keep going up at a faster rate as well. The contributing factors to the increase in its exports include the export of goods and the export of services. In terms of services I mean tourism and education. Tourism is also an export because people are in a way buying their chance to see a tourist site. That money is considered as the income from exports. And of course the U.S. has one of the best education systems available worldwide so many pay people pay large sums of money from abroad so they can study in universities in the U.S. In terms of goods, according to the dailybeast.com the U.S. does make things that the world wants such as different varieties of grains and oil machines as well (thedailybeast.com). In the article chose it said that some of the increased exports consisted of aircraft engines, farm goods, heavy machinery and telecommunications equipment. The U.S. economy was doing well in these sectors of their export because the world was increasing its demand for them.
http://www.nytimes.com/2013/08/07/business/economy/trade-gap-falls-suggesting-faster-us-economic-growth.html http://www.thedailybeast.com/articles/2013/08/06/u-s-exports-hit-record-191-billion-in-june-and-shrink-trade-deficit.html

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Now lets move onto imports. America is the largest importer in the world but it is also the richest country in the world. 19% of all imports of the U.S. belong to China which makes its greatest source of imports. According to worldsrichestcountries.com the total cost of imports from China per year for the U.S. is $444.4 billion dollars (worldsrichestcountries.com). The leading category of import is electrical equipment which accounts for $113.3 billion dollars which is almost of the total cost of imports. However the total costs of all exports to China form the U.S. is $110.6 billion dollars around 7.2% of their total exports. So China exports roughly the same amount just in electrical equipment to the U.S. This shows that the exports to China arent nearly enough to pay for the imports from it. This forces the U.S. economy to spend money on Chinese imports through what they make by exporting to other countries. Which still isnt enough and it then creates a trade deficit of $34.2 billion. So the American economy isnt doing great in its exports to China but even still the trade deficit with China was reduced by 4.3%. The U.S economy has to decrease that even further to drop the overall trade deficit even more. This is easier said than done. The #1 of all American imports is oil and it makes up for 18.6% of all its imports per year. The article, on a more positive note, says that the oil imports had fallen to their lowest level in over 2 years. And surprisingly oil is at #3 on the U.S. exports list and it makes up for 8.9% of the total exports. This is mostly because of the rise of the oil foundations such has shale foundations which is doing tremendously in the U.S. mining industry (thegwpf.com). Reduction of oil imports is one of the crucial steps the U.S. has to take because it spends so much on which ultimately widens the trade deficit. But by the new companies such as shale foundations it looks like the U.S. economy is likely to do just that. June has been a relatively good month for the U.S. as its trade deficit decreased and the predicted data for July looked promising. And when I first read this article I also thought that the U.S. would continue to decrease its trade deficit in July as well, and I believed that it was possible. However the trade deficit numbers for July show otherwise because it went back up to $39.1 billion alarmingly (blog.bea.gov). This meant that the imports decreased and exports increased only for a specific amount of time. This could have been because of seasonal change in other countries because the there was a increase in exports of the farming equipment. It might have been harvest time in that country which is why the exports for that specific sector must have increased. To answer the research question, the U.S. has done a significant amount by cutting back on its imports (specifically with China) and increasing exports of what they make best, farming equipment, oil machines, etc. This has also helped the GDP as more units were made which led to some amount of economic growth. Unfortunately, it couldnt be maintained and everything the economy did was short lived hue to possible seasonal changes in other countries. In the June sector everything seemed to be getting better but the future proved otherwise. (Word count excluding bibliography and footnotes - 1198)
http://www.worldsrichestcountries.com/top_us_imports.html http://blog.bea.gov/category/trade-deficit http://www.thegwpf.org/americas-shale-export-revolution

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Bibliography in MLA format"Americas Shale Export Revolution." The Global Warming Policy Foundation (GWPF). N.p., n.d. Web. 28 Oct. 2013. <http://www.thegwpf.org/americas-shale-exportrevolution/>. Associated press . "Trade Gap Falls, Hinting At Pickup in U.S. Growth." www.nytimes.com. N.p., 6 Aug. 2013. Web. 15 Oct. 2013. <http://www.nytimes.com/2013/08/07/business/economy/trade-gap-falls-suggestingfaster-us-economic-growth.html>. Ioannou, Filipa. "U.S. Exports Hit Record $191 Billion in June and Shrink Trade Deficit." The Daily Beast. Newsweek/Daily Beast, 6 Aug. 2013. Web. 28 Oct. 2013. <http://www.thedailybeast.com/articles/2013/08/06/u-s-exports-hit-record-191billion-in-june-and-shrink-trade-deficit.html>. "Top US Imports." Top US Imports. N.p., n.d. Web. 28 Oct. 2013. <http://www.worldsrichestcountries.com/top_us_imports.html>. "U.S. Bureau of Economic Analysis." US Bureau of Economic Analysis. N.p., n.d. Web. 28 Oct. 2013. <http://blog.bea.gov/category/trade-deficit/>.

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