Question

It is no secret that China has a large trade surplus with the United States. Our...

It is no secret that China has a large trade surplus with the United States. Our open and large markets are very attractive to manufacturers all across the globe.

Is it in the long run interest of the United States to maintain such trade deficits?

Are there any benefits to open trade for the US?

Is there a net benefit or net gain to free trade according to economic theory?

Do you agree with that theory?

Homework Answers

Answer #1
  1. No, because trade deficits are burdensome and affect a lot of things negatively.
  2. Yes, US is able to import goods it cannot manufacture or it does not possess at lower price because labor is very costly in US.
  3. Yes, there is a net gain. US consumers get good quality products at low prices, the consumers can also buy more in terms of quantity and variety, there is economic efficiency, there is innovation and high consumer surplus.
  4. I agree with the theory but there is a limit to everything. too much import will be disastrous in future.
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