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International Trade and Finance

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International Trade and Finance The United States imports many goods and services, as well as exports goods and services in the global economy. International trade affects the United States’ Gross Domestic Product (GDP) and domestic markets. The government can affect international trade by imposing tariffs and quotas on imports. Foreign exchange rates affect how much is brought and sold abroad. International trade is beneficial to the United States, but can sometimes be seen as unfair competition to the American workforce and businesses.
Trade Surpluses and Deficits A country has a trade surplus when exports exceed imports. This situation will initially create wealth for the country, but in the long-run the country’s currency appreciates causing the cost of its goods to other countries (exports) to become more expensive; which evens out the trade imbalance. After World War II the United States was in this situation, becoming an international lender to foreign countries (Colander, p. 449). This created wealth for the U.S. because of the flow of interest payments, instead of having to pay income on its own debt. A trade deficit is when a country imports more than it exports. The United States is currently experiencing this type of trade imbalance. The U.S. is consuming more than it is producing, and they are financing this consumption by selling off assets such as stocks, bonds, real estate, and corporations (Colander, p. 448, 449).
Effects of Excess Imports When the United States has an excess of an import from another country, it can have detrimental effects on businesses in the states competing against the importer. For example, if Japan imports too much rice into the United States, then it could potentially put rice farmers out of business or lower the price so low that American rice farmers would be taking huge losses. Farmers in the United States would

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