International Trade and Finances

International Trade and Finance

Jeanette LeBlanc, Miriam Mlabasati, Marvelous Smart, Jessica Sullivan, Corinthia Stroud

ECO/372

June 15, 2015

Laurie Klosk-Gazzale

International Trade and Finance

Good morning, ladies and gentlemen of the press. As Speaker of the House, today's topic is the current state of the United States macroeconomic. A quote by Ronald Reagan comes to mind and seems to be correct today, "Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it". (Quotes about economy and recession, 2015) The focusing on international trade, foreign exchange rates and the effect they have on this country economy. Detailing import surplus, tariff, how foreign exchange rates are determined and if the restriction of goods from China should be leveled. By the end of this speech, it is hoped that a better understanding of all these aspects of how macroeconomics works together, with positive and negative effects.

Surplus of Imports

In 2013, the total U.S. trade deficit was $476.692 billion because its imports of $2.76 trillion exceed its exports of $2.28 trillion. Showing that the economy is strengthening, since the deficit is lower than in 2012 when it was $537.6 billion, a lower deficit means exports are starting to gain on imports. That is good for business, which will eventually create more U.S. jobs. It's also less than the record $753 billion trade deficit in 2006. (Amadeo, 2015)

To express the current account is the difference between the value of exports of goods and services and the value of imports of goods and services. When deficit reflects an excess of imports over exports, this can be an indicator of competitiveness problems. (Ghosh, Ramakrishnan, 2015) With the persistent surpluses in the United States, capital account economists offer conflicting views. Some see this as evidence that the United States needs to borrow from the foreign company to pay for the importing more that exporting. Others see the surpluses as a strong desire of foreigners to invest in the United States economy.

United States has a surplus of many goods, such as raw materials used to produce clothes and dolls in China, also on the list would be automotive parts. Prices on raw material and labor are much lower than here in the United States. Imports such as Sony television made in Japan, or clothes and doll parts made in China would affect the prices. Some of the products also help America businesses because they use the produce to products here. For business, the prices would need to lower to help sell the surplus, but for the consumer it is a positive by saving their money.

Effects of International Trade

The effects of international trade to GDP are that imports and exports have a large impact on GDP. According to New York Times, GDP is a direct reflection to employment in the United States. Also, imports and exports are one of the most important pieces of the American economy. (The impact of Foreign Trade on the Economy 2008). When there is a negative impact on GDP, it also affects employment. When employment is affected, it impacts college students because there will be fewer jobs for graduates. Also, when GDP is in downward spiral tuition will be raised to survive the weakening of the dollar.

Government Choices

Government choices affect tariffs because they can raise their taxes on imports and exports. When foreign countries produce goods, more cheaply it is more likely that people will complain about poor working conditions. If the government doesn’t implement a tariff, it could affect jobs at a domestic level because labor will be cheaper abroad (Radcliffe, 2015) Tariffs can also help with retaliation. If a country feels that one of the countries is not playing fair the government can implement a tariff. According to Investopedia, a tariff can be applied if a trade goes against countries foreign policy. (Radcliffe, 2015) 

Foreign Exchange Rates

        Goods and services are not the only things that are imported and exported or exchange in the foreign market. Money plays a major role when it comes to foreign exchange. Foreign exchange rates are very important in the foreign market please because it controls the value of money between countries. Foreign exchange rates are the price of one nation's currency in the terms or format of another nation's currency. Foreign dollar rates are determined just like any other goods and services that are by supply and demand. For example, the United States currency is always in demand so is going to be available for supply at many other country's currency rates. When the United States dollar goes down other countries exchange rate will increase and when the United States dollar increases other countries currency rate will decrease.