We see the US tends to import more goods than they export Re

We see the U.S. tends to import more goods than they export. Regardless of the imbalance of trade the U.S is still an economically competitive country. Do you think trade is just a small component of what makes a country economically successful?

Solution

US is importing more goods than export. It is due to the fact that many developed countries in the world are intentionally maintaining a depreciated value of currency. When value of currency depreciates, import is costly for such economy. But export is possible at lower rate. So export increases and import fall. thus trade balance becomes favorable. This is observed for EURo dollar exchange rate. China is also maintainig a depreciated value of their domestic currency. USA is requesting such countries to correct their currency value. Some correction was made but they are not adequate. Due to this reason export by USA in those countries are less than import. Thus balance of trade in USAbecomes adverse. Those countries have huge dollar in their custody. If they are released then supply of dollar will increase abormally and dollar value will decrease at a very sharp rate. There will be ecoomic crisis in US. Thus it is very difficult now to rectfy the position. So the adverse balance is expected to cotinue.

However in spite of adverse trade balance Us economy is economically competitive. It is due to the strong internal base of the US economy. It has a very well structured develped idustrial base which can withstand adverse trade balance succesfully. But if it continues for long time and unless remedial measures are taken, in the long run there will be a serious set back in the economy.

Thus trade balance is a vital element for success of the economy. Unless it is kept in check country has to suffer in the long run in spite of a strong economic base of the country.