Advantages and Disadvantages of Trade Deficit

Advantages of Trade Deficit

The advantages of having the trade deficit are as follows:

 It allows a country to consume more than its production capacities.

 It helps nations to avoid any shortfall in goods.
 It provides the countries with a comparative advantage when such
countries are involved in the trade. It is beneficial as a whole for
increasing global wealth.
 It allows generating more foreign direct investment

Disadvantages of Trade Deficit

The disadvantages of the trade deficit are as follows:

 It is harmful to a developing country as more imports lead to deflation and

increase the fiscal deficit.
 More jobs are outsourced, as domestic industries shrink with less demand
when demand for foreign goods increases.
 In the form of attracting foreign investment due to the trade deficit, the
country may end up providing ownership of its resources and assets to
the foreign country.
 A higher trade deficit leads to a decrease in the value of the local
currency.

Explanation:
 It provides the countries with a comparative advantage when such
countries are involved in the trade. It is beneficial as a whole for
increasing global wealth.
-In my own understanding, trade deficit is beneficial for us because it
can provides the needs and wants of every country. We all know that goods
or services that we bought from other country are for our own good and
safety. It can also increased the global wealth of our country, this signifies that
this country is in good condition.

 In the form of attracting foreign investment due to the trade deficit, the
country may end up providing ownership of its resources and assets to
the foreign country.
- in my own understanding, this Disadvantages means that it can
possibly ended up providing ownership of its resources and assets to the
foreign country. At the same time, foreign companies will likely hire new
workers to keep up with the demand for their exports. Foreign country could
possibly given a chance to rule or control our country.