Why US Trade Data Is Not As Strong As It Should Be
US trade deficit means the difference between imports and exports. The deficit is mainly due to non-exports i.e. imports minus exports. A trade deficit simply means that the country’s gross domestic product is greater than the value of exports. When it comes to Forex trading, it is very important to understand US trade data because this plays a very crucial role in Forex trading. Hence, let us take a look at this issue and try to understand why it is so important to understand the US trade deficit before we go ahead and invest in any currency.
In simple words, a nation’s trade deficit means the difference between its exports and imports. Importing countries can either purchase goods directly from you or purchase goods from you at a low price and sell them at a higher price to their consumers. On the other hand, exporting nations can either purchase raw materials from you or purchase manufactured products from you at a low price and sell them at a higher price to their consumers. Such is the mechanism through which free trade is facilitated. However, there are various issues which affect this mechanical process. One of the major issues which limit free trade is the fact that both importing and exporting nations have to respect some of the rules and regulation of the international customs.
How do the trade data helps in customs relate?
Basically, the rules and regulation of the international customs relate to protection of good manufactured or processed by the entities of the country which is to be imported. For example, you cannot import raw materials which are harmful to health. Similarly, the importer cannot deny the same to the exporter. Similarly, the importer cannot deny the same for the purpose of promoting his products or providing subsidized prices. Therefore, the duty on such items are levied by the customs. Such rules and regulation not only restrict the foreign companies from violating the restrictions of the trade but also help in promoting national economy.
As per statistical records, US has one of the highest trade deficits (although it has a larger deficit with Germany) in comparison to other G7 countries. The reason behind US high deficit is its huge merchandise imports (exports have lesser value than the imports) and the huge use of non-domestic sources of income. As a result, US has higher imports and correspondingly, its trade deficit has become larger as compared to other G7 countries.
Know the various aspects of US trade
The first aspect of US trade, which is related to imports and exports is the balance of foreign trade (FOTP). FOTP refers to the difference between actual imports and exports. If the balance of foreign trade is positive, then imports will be counterbalanced by exports. On the other hand, if the balance of foreign trade is negative, i.e., the government uses domestic resources (domestic assets) to finance its imports and exports, then the external debt of the country will become positive and imports will become counterbalanced by exports.
Moreover, as far as the nature of the goods exported or imported is concerned, the US domestic economy is totally dependent on foreign trade agreements. For instance, the recent strengthening of the Mexican peso against the US dollar shows that Mexico is increasingly interested in buying goods from the US and selling them to other nations. Similarly, China is pursuing similar ambitions. Hence, the US market for exports is becoming increasingly difficult. Moreover, the recent strengthening of the Japanese yen, against the US dollar, shows that Japan is increasingly interested in buying European goods and selling them to other countries. If you are looking for accessing the US trade data then you can visit websites like importkey.com.