Trade
of disconnect between supply and
Trade is a basic economic concept involving
the buying and selling of goods and services,
with compensation paid by a buyer to a seller,
or the exchange of goods or services between
parties. Trade can take place within an
economy between producers and consumers.
 International trade- allows countries to
expand markets for both goods and
services that otherwise may not have
been available to it.
 Trading globally- between nations
allows consumers and countries to be
exposed to goods and services not
available in their own countries. Almost
every kind of product can be found on
the international market: food, clothes,
spare parts, oil, jewelry, wine, stocks,
currencies, and water. Services are also
traded: tourism, banking, consulting,
and transportation. Imports and exports
are accounted for in a country's current
account in the balance of payments.
 International trade not only results in
increased efficiency but also allows
countries to participate in a global
economy, encouraging the opportunity
of foreign direct investment (FDI), which
is the amount of money that individuals
invest into foreign companies and other
assets.
Surplus
 A surplus isn't necessarily desirable. For
example, a manufacturer who over-
projects future demand for a given
product may create too many unsold
units, which may consequently
contribute to quarterly or annual
financial losses. A surplus of perishable
commodities like grains could cause a
permanent loss, as inventory spoils and
the items become unsellable
 surplus occurs when there is some sort
demand for a product, or when some
people are willing to pay more for a
product than others. Hypothetically
speaking, if there were a set price for a
certain popular doll, that everyone was
unanimously expected and willing to
pay, neither a surplus nor a shortage
would occur. But this rarely happens in
practice, because various people and
businesses have different price
thresholds--both when buying and
selling.
Deficits
 A deficit is an amount by which a
resource, especially money, falls short
of what is required. A deficit occurs
when expenses exceed revenues,
imports exceed exports, or liabilities
exceed assets. A deficit is synonymous
with shortfall or loss and is the opposite
of a surplus.
 In a deficit, the total of negative amounts
is greater than the total of positive
amounts. In other words, the outflow of
money exceeds the inflow of funds. A
deficit can occur when a government,
company, or individual spends more
than he, she, or it receives in a given
period, usually a year.
Trade deficit
 A trade deficit exists when a nation’s
imports exceed its exports. For
example, if a nation imports $3 billion in
goods but only exports $2 billion, then
that nation has a trade deficit of $1
billion for that year. The implication is
that there is more value entering the
country than there is leaving the
country. As a result, the country owes
more money to other countries than it
has due from money owed to it. A trade
deficit can also cause a drop in a
domestic currency’s value and a
reduction in jobs.
  The opposite of a trade surplus is a
trade deficit. A trade deficit occurs when
a country imports more than it exports.
A trade deficit typically also has the
opposite effect on currency exchange
rates. When imports exceed exports, a
country’s currency demand in terms of
international trade is lower. Lower
demand for currency makes it less
valuable in the international markets.
 A trade deficit is a situation where a
country spends more on
aggregate imports from abroad than it
earns from its aggregate exports. A
trade deficit represents an outflow of
domestic currency to foreign markets.
This may also be referred to as a
negative balance of trade (BOT).
Balance of Trade (BOT)?
A trade surplus can create employment and
economic growth, but may also lead to higher
prices and interest rates within an economy. A
country’s trade balance can also influence the
value of its currency in the global markets, as it
allows a country to have control of the majority
of its currency through trade. In many cases, a
trade surplus helps to strengthen a country’s
currency relative to other currencies, affecting
currency exchange rates; however, this is
dependent on the proportion of goods and
services of a country in comparison to other
countries, as well as other market factors.
When focusing solely on trade effects, a trade
surplus means there is high demand for a
country’s goods in the global market, which
pushes the price of those goods higher and
leads to a direct strengthening of the domestic
currency.

The balance of trade is the difference between

the value of a country's imports and exports for Usa and China
a given period. The balance of trade is the
largest component of a country's balance of
payments. Economists use the BOT to
measure the relative strength of a country's
economy. The balance of trade is also referred
to as the trade balance or the international
trade balance.

A trade surplus is an economic measure of a

positive balance of trade, where a country's
exports exceed its imports.

 Trade Balance = Total Value of Exports

- Total Value of Imports

A trade surplus occurs when the result of the

above calculation is positive. A trade surplus
represents a net inflow of domestic currency
from foreign markets. It is the opposite of a
trade deficit, which represents a net outflow,
and occurs when the result of the above
calculation is negative. In the United States,
trade balances are reported monthly by the
Bureau of Economic Analysis.
Trade Surplus
https://www.thebalance.com/u-s-trade-deficit-
causes-effects-trade-partners-3306276
by: Kimberly Amadeo
The U.S. trade deficit with China was
$419 billion in 2018. The trade deficit exists
because U.S. exports to China were only $120
billion while imports from China were $540
billion. 
The biggest categories of U.S. imports from
China were computers and accessories, cell
phones, and apparel and footwear. A lot of
these imports are from U.S. manufacturers that
send raw materials to China for low-cost
assembly. Once shipped back to the United
States, they are considered imports.  2. An exchange rate that is partially fixed
China's biggest imports from America are
commercial aircraft, soybeans, and autos. In
2018, China canceled its soybean imports after
President Trump started a trade war. He
imposed tariffs on Chinese steel exports and
other goods.
Exports US$110.5 US$121.1 US$123. US$115.8
Billion Billion 7 Billion
Imports US$425.6 US$440.4 US$468. US$483.2
Billion Billion 4 Billion.
Balanc US$ US$ US$-
e -315.1 -318.6 344.8
2012 2013 2014
Chart: The Balance Source: United States
Census Bureau
Causes of trade deficits
CONCLUSION
A nation with a trade deficit spends more for
imports than it makes on its exports. In the short
run, a negative balance of trade curbs inflation. But
over time, a substantial trade deficit weakens
domestic industries and decreases job opportunities.
A huge reliance on imports also leaves a country
vulnerable to economic downturns. Currency
devaluations, for example, make imports more
costly. This stimulates inflation.
Causes
China can produce many consumer goods at
lower costs than other countries can.
Americans, of course, want these goods for the
lowest prices. How does China keep prices so
low? Most economists agree that China's
competitive pricing is a result of two factors:
1. A lower standard of living, which allows
companies in China to pay lower wages
to workers.
to the dollar.
If the United States implemented trade
protectionism, U.S. consumers would have to
pay high prices for their "Made in America"
goods. It’s unlikely that the trade deficit will
change. Most people would rather pay as little
as possible for computers, electronics, and
clothing, even if it means other Americans lose
their jobs.
Billion China is the world's largest economy. It also
has the world's biggest population. It must
divide its production among almost 1.4 billion
residents. A common way to measure the
Billion standard of living is gross domestic product per
US$- capita. In 2017, China’s GDP per capita was
367.3 $16,600. China's leaders are desperately trying
2015 to get the economy to grow faster to raise the
country’s living standards. They remember
Mao's Cultural Revolution all too well. They
know that the Chinese people won't accept a
lower standard of living forever.
China sets the value of its currency, the yuan,
to equal the value of a basket of currencies
that includes the dollar. In other words,
China pegs its currency to the dollar using a
modified fixed exchange rate. When the dollar
loses value, China buys dollars through U.S.
Treasurys to support it. In 2016, China began
relaxing its peg. It wants market forces to have
a greater impact on the yuan's value. As a
result, the dollar to yuan conversion has been
more volatile since then. China's influence on
the dollar remains substantial.
Effect
China must buy so many U.S. Treasury notes
that it is the largest lender to the U.S.
government. Japan is the second largest. As
of April 2019, the U.S. debt to China was $1.1
trillion. That's 27% of the total public
debt owned by foreign countries.
Many are concerned that this gives China
political leverage over U.S. fiscal policy. They
worry about what would happen if China
started selling its Treasury holdings. It would
also be disastrous if China merely cut back on
its Treasury purchases.
Why are they so worried? By buying
Treasurys, China helped keep U.S. interest
rates low. If China were to stop buying
Treasurys, interest rates would rise. That could
throw the United States into a recession. But
this wouldn’t be in China's best interests, as
U.S. shoppers would buy fewer
Chinese exports. In fact, China is buying
almost as many Treasurys as ever.
U.S. companies that can't compete with cheap
Chinese goods must either lower their costs or
go out of business. Many businesses reduce
their costs by outsourcing jobs to China
or India. Outsourcing adds to
U.S. unemployment. Other industries have just
dried up. U.S. manufacturing, as measured by
the number of jobs, declined 34% between
1998 and 2010. As these industries declined,
so has U.S. competitiveness in the global
marketplace.  it would have risen instead.
technology to Chinese firms. China requires
companies to do this to gain access to its
market.
Trump also asked China to do more to raise its
currency. He claims that China artificially
undervalues the yuan by 15% to 40%. That
was true in 2000. But former Treasury
Secretary Hank Paulson initiated the U.S.-
China Strategic Economic Dialogue in 2006.
He convinced the People's Bank of China to
strengthen the yuan's value against the dollar.
It increased by 2% to 3% annually between
2000 and 2013. Former U.S. Treasury
Secretary Jack Lew continued the dialogue
during the Obama administration. The Trump
administration continued the talks until they
stalled in July 2017.
The dollar strengthened 25% between 2013
and 2015. It took the Chinese yuan up with it.
China had to lower costs even more to
compete with Southeast Asian companies. The
PBOC tried unpegging the yuan from the dollar
in 2015. The yuan immediately plummeted.
That indicated that the yuan was overvalued. If
the yuan were undervalued, as Trump claims,
 

What's Being Done

President Trump promised to lower the trade

deficit with China. On March 1, 2018, he
announced he would impose a 25% tariff on
steel imports and a 10% tariff on aluminum. On
July 6, 2018, Trump's tariffs went into effect for
$34 billion of Chinese imports. China canceled
all import contracts for soybeans.

Trump's tariffs have raised the costs of

imported steel, most of which is from China.
Trump's move comes a month after he
imposed tariffs and quotas on imported solar
panels and washing machines. China has
become a global leader in solar panel
production. The tariffs depressed the stock
market when they were announced.

The Trump administration is developing further

anti-China protectionist measures, including
more tariffs. It wants China to remove
requirements that U.S. companies transfer
US TRADE DEFICITS

CAUSE

Raw materials for manufacturing that are

shipped overseas to factories count as exports.
The finished manufactured goods are counted
as imports when they're shipped back to the
country

EFFECTS

• It can raise a country's standard of living

because its residents gain access to a
wider variety of goods and services for a
more competitive price.

Brief history of China

- China's history is rich with art, politics,

science, and philosophy. It is home to the
oldest of the major world civilizations.

- China was ruled by various dynasties for

much of its history. The first dynasty is
believed to be the Xia dynasty which formed
somewhere around 2250 BC.

International trade -not only results in

increased efficiency but also allows countries
to participate in a global economy, encouraging
the opportunity of foreign direct investment
(FDI), which is the amount of money that
individuals invest into foreign companies and
other