Question

What should the U.S. policy be toward its trade deficit with China and what action steps should be taken to put this policy into effect?

Answer 1

Trade deficit occurs when the country has more imports than exports. In case of U.S. and China, China has been exporting its products to U.S. at a cheaper rate. This has led to the trade deficit and the manufacturing sector has been affected the most. This is a matter of huge concern for U.S. In order to prevent the situation from worsening further, the steps that U.S. needs to take are:

It has to restrict the import of Chinese products into the U.S. markets.

This can be done by imposing tariffs on the import of Chinese products. The tariffs should be high so that exporting products will become costly for China. The other way can be to take the help of WTO on the trade deficit problem and restrict China from dumping goods in U.S. markets. These changes in the trade policy of U.S. will change the balance of payments situation in U.S.