United States Trade Deficit
Graph from: "A History of Surpluses and Deficits in the United States." DaveManuel.com. N.p., n.d. Web. 03 June 2015. <http://www.davemanuel.com/history-of-deficits-and-surpluses-in-the-united-states.php>.
Data from: N.p., n.d. Web. June 03 June 2015. <https://www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/hist01z1.xls>.
Each and every day, our docks are lined with ships carrying foreign made products that we once produced for ourselves. Competition from foreign countries has always existed. The graph below, however, illustrates how the situation has gotten worse and worse over time.
During the 74 year period, we had only 11 trade surpluses.
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Each of these surpluses were very small.
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Up until 1976, the trade deficits were not particularly large either.
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From 1976 until present, however, our trade deficits have been persistent and huge.
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We had a consecutive stretch of trade deficits for 21 years from 1976 to 1997.
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In 2009, the trade deficit more than tripled compared to the previous year.
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From 2009 to 2013, the trade deficit has jumped to staggering rates of more than $750 billion each year.
The reason that the trade deficits were not particularly big in earlier years was because our government implemented some protectionist policies to balance our trade. These policies included measures to keep imports out, such as tariffs, taxes on imports, and quotas, limits on the quantity of imports. We also took steps to get more of our output abroad, such as subsidies, payments to certain industries to make our goods or services cheap for export. The deficits began to grow when these regulatory barriers were removed and trade became more free.
While most economists agree on the theoretical benefits of free trade, the real world effect of such policies are more problematic. Domestic producers in the United States have lost their competitiveness. The economic health of the country has suffered too. The economic growth of a country is often defined in terms of GDP, which is consumer spending, plus investment spending, plus government spending, plus exports minus imports. So, a trade deficit will always be a “drag” on GDP.