Pros and Cons of a Trade Deficit - Deepstash
Pros and Cons of a Trade Deficit

Pros and Cons of a Trade Deficit

Curated from: investopedia.com

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Trade Deficits

Trade Deficits

Trade Deficits happen when the value of a country's imports exceeds the value of its exports. The imports and exports include goods, physical products, and services. 

It's not inherently good or bad but trade deficits can actually be a sign of a strong economy and under certain conditions could lead to stronger economic growth for the deficit-running country in the future.

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Trade Deficits and Economic Growth

There is no clear link between trade deficits and economic growth because even if a country has a strong trade surplus does not equate to strong economic growth, take for example Japan and Germany.

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Trade Deficits and Employment

Economists argue on the broad impact of trade deficits on employment. Some argue for the connotation that imports necessarily reduce employment at home while others point to offsetting job growth in other sectors through the same trade ties. 

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