Is it Healthy for the U.S. to have a Trade Deficit of 20 Billion+ every month with CHINA? Your Thoughts.......

Question

The Total Amount for the Year is $240 BILLION DOLLARS+.......

Answer 1

China is overtaking the US in terms of economy because the wide gap in trade in favor of the former. Thus, the US is now indebted to China which the latter could use for many purposes especially when it comes to a point that the US could no longer pay.

Answer 2

The dollar should reflect its true value with the trade deficits if China central bank doesnt force banks to buy bonds and sell dollar to lower value of Yuan in equilibrium exchange rate market. Hence, the Yuan keeps on maintaining lower value and the trade deficits is growing more at the cost of American industries.

Financial market’s price is still affected by equilibrium market between supply and demand. The trade deficits are the lose of wealth of US second economic sector and the related or decrease in aggregate net income without other economic markets relating to national consumptions. The lower inflation from imports’ price can be profitable for increase in consumption in the financial market until the consumption decrease from the international liabilities surpass assets and market price falls. More and more the conventional industries are gone, the US economy is a dependent economy of imports. When the economy must devalue the dollar, a minor inflation will come and interest rate must adjust correspondingly. If the financial profits are lesser risk free rate in linear, and investors tend to put money into risk free rate funds while uncle Sam also needs to borrow more money because of the borrowing cost increase. The financial market can suffer with deficits in future. China maybe also become the decision of growth of US economy, how and when.