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FOREX and Global Trade

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Gabriella Elanbeck

on 9 June 2015

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Transcript of FOREX and Global Trade

The U.S. in the Global Economy
In April 2015, the United States Balance of Trade was
The US has been running consistent deficits since 1976 due to high imports of consumer products and
By Gaby Elanbeck
-40.9 Billion Dollars.
Balance of trade is defined as the difference
between a nation's imports and its exports.

The fact that the United States has a trade deficit means that it imports more than it exports.
EXPORTS: $189.9B

IMPORTS: $230.8B
A. The rise in the value of the dollar makes it harder for the US to return a profit from another country who's currency is valued less.

B. The rise in the consumption of goods and imports.

C. Foreign Trade Barriers

D. Domestic Products became less competitive and less sought after by other countries.
A. Decrease the budget that the country is allowed to decrease the
value of the dollar to compete with other countries.

B. To decrease the amount each person consumes,
even by a slight amount would help greatly.

C. To eliminate non essential trade barriers between countries.

D. The US should continue to increase productivity
and the quality of the products to entice buyers.

E. The US should invest in capital goods and research.
The China Situation
Exchange Rates:

The greatest trade deficits are recorded with China, Japan, Germany and Mexico.
The US records trade surpluses with Hong Kong, Netherlands, United Arab Emirates and Australia.

Trade Policies
: affect the import/export market. High tariffs and duties may hinder free trade.
Exchange rates
: if a domestic currency appreciates, it creates a cost competitiveness that prices out exporters.

Foreign currency reserves
: to compete in international markets, reserves are needed to augment productivity.
: if inflation is high, units of production cost more, affecting exports.
B.O.T. Basics
Exports rose 1 percent to $189.9 billion. Exports of goods increased $1.9 billion to $129.0 billion in April: capital goods increased $2.1 billion; civilian aircraft increased $1.0 billion; telecommunications equipment increased $0.6 billion; other industrial machines increased $0.3 billion.
Imports shrank 3.3 percent to $230.78 billion. Imports of goods decreased $7.4 billion to $189.6 billion in April: consumer goods decreased $4.9 billion; cell phones and other household goods decreased $1.3 billion; other textile apparel and household goods decreased $0.9 billion; footwear decreased $0.8 billion.
Between March and April:
So the US should EXPORT rather than
IMPORT goods, or purchase domestic goods.
Though Canada is the US's top trading partner, the deficit is a mere $8.6B because trade is relatively balanced.
The United States' largest exports are vehicles, machinery, and electric machinery.
Canada was 19% of the export market in 2013.
Since 2007 China has become the United States' principal source of imports accounting for 19% of total imports in 2009.
China is also the third largest export market for the U.S. with 6.6% of total exports in 2009.
China has become the "largest foreign supplier of computer equipment in 2008 with a 53.6% share of total U.S. imports" and the third largest supplier of agricultural products with 4.3% share of such products imported by U.S.
The major U.S. export to China in 2008 was waste and scrap followed by semiconductors and other electronic components and oil seeds and grains.
Four main factors contribute
to the overall increasing deficit.
The dollar is doing well as many other currencies depreciate.
The value of the Euro has dropped significantly due to the economic crisis.
The yuan has depreciated due to speculation problems with the central banking system of China.
Although the pound has depreciated against the dollar, the pound is expected to bounce back.
The rupee is dropping due to poor expectations (animal spirits).
Full transcript