Balance of Trade

Balance of trade is the balance between two countries' wins and losses in trade. These
wins and losses can be seen as either surplus or deficit to exporters and importers of goods. To
achieve a trade surplus a country must export more goods than they import, a trade deficit
occurs when a country imports more goods than it exports.
There are many trade agreements made by the United States that exist where both
sides benefit, but there are always winners and losers in every trade. The first exchange occurs
between China and the United States trade agreement concerning electronics and computer
parts. Within this trade the winner is China as China's sheer volume in producing tech and
electronics has garnered them the title of the premier producers of electronics worldwide,
importantly as a surplus to the United State’s large market. The United States are the losers of
this trade as the United States trade deficit with China has ever grown since the recession of
2008, the U.S has begun to import more and more electronics, consequently exporting far
fewer, costing over 4 million american jobs. To correct the balance of trade, the United States
should invest in more efficient factories in order to compete in the same market as China in
hopes of reaching a surplus.
 The second trade balance scenario takes place between The United States and Japan’s
exchange of automobiles. The clear winner of this trade is Japan as they have led the world in
car production since it increased during the buildup of World War Two. Japan has earned the
reputation for having the most reliable cars in the world. The loser of the exchange is the United
States as the demand for Japanese cars has increased dramatically in America. Japan has the
comparative advantage in car manufacturing and imports food and fuel/oil products, creating a
deficit for the United States. This deficit could be overcome by marketing to other markets
similar to what Japan has done marketing in the United states, putting a larger hand into foriegn
markets would create a much greater influx of exported automobiles from America.

Domestic Production of Japanese Automobiles

 Another example of a trade imbalance takes place between the United States and
Germany. When it comes to an overall deficit, Germany has a surplus over the United States.
However, in the example of civilian aircraft and aircraft parts, the US currently has an
advantage. Boeing and its European rival Airbus have had trade disputes for over a decade.
During the pandemic both manufacturers have significantly decreased production, but Germany
still imports the largest amount of aircraft from the US. Recently, in response to new tariffs
imposed by the EU on
american products, the United
States has responded by
setting new tariffs on German
and French aircraft
manufacturers. This was in an
effort to narrow the overall
trade deficit between the
United States and Germany.
The European Union has
since argued that the new
tariffs are unfair, and hope to
settle the dispute with the
incoming administration and
the WTO.
Another example of a trade imbalance takes place between the Unites States and
pharmaceutical companies both domestic and european based mainly in Ireland and
Switzerland. Due to a system that stifles competition and consumer choice Big Pharma goes by
relatively untaxed and has led to massive price hikes on regular pharmaceuticals and
prescription medication. And has led to massive profit margins for both US companies and
european companies even with higher wages and taxes are still able to outcompete US Pharma
in slightly cheaper pricing evidenced by Imports of pharmaceuticals having increased from $65
billion in 2006 to $151 billion in 2019. Meanwhile the biggest loser in this trade exchange is the
US treasury missing out
on millions of potentially
taxable dollars.

The trade balance between America’s imports and exports is important to all countries
as the United States are a pivotal country for the trading of all goods and services. The
importance of trade balance is evermore important. There are always winners and losers, but
with solutions and effort, steps can be taken towards balance of trade and mutual benefit.

Works Cited
Amadeo, Kimberly. “Why America Cannot Just Make Everything It Needs.” The Balance, 26 July

2020, www.thebalance.com/trade-deficit-by-county-3306264.

Robert E. Scott and Zane Mokhiber. “Growing China Trade Deficit Cost 3.7 Million American

Jobs between 2001 and 2018: Jobs Lost in Every U.S. State and Congressional District.”

Economic Policy Institute, 30 Jan. 2020,

www.epi.org/publication/growing-china-trade-deficits-costs-us-jobs/.

Shalal, Andrea, and David Lawder. “New U.S. Tariffs on French, German Aircraft Parts, Wines

to Start Tuesday.” Reuters, Thomson Reuters, 12 Jan. 2021,

www.reuters.com/article/us-usa-trade-eu-aircraft/new-u-s-tariffs-on-french-german-aircraft-parts-

wines-to-start-tuesday-idUSKBN29H007.

Steven L. Byers, PhD and Jeff Ferry. “Reshoring US Pharmaceutical Production Would Create

800K Jobs.” CPA, 17 Mar. 2020,

www.prosperousamerica.org/reshoring_us_pharmaceutical_production_would_create_800k_job

s.

Setser, Brad W. “The Irish Shock to U.S. Manufacturing?” ​Council on Foreign Relations​, Council

on Foreign Relations, 15 May 2020,

www.cfr.org/blog/irish-shock-us-manufacturing#:~:text=Only%20U.S.%20output.,have%20incre

ased%20substantially%20since%202006.&text=Imports%20of%20pharmaceuticals%20have%2

0increased,in%20March%20of%20this%20year.