What solution can be done to the trade deficit, in particular with China.?

2 Answers

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   Nick Z on Jun 13, 2011

   Nobody knows how long the large US trade deficits can be sustained. But most economists say that these deficits cannot continue forever. And the more these deficits accumulate, the more likely it becomes that investors will panic and sell off the US dollar.

   Or the countries that are accumulating the US dollars now may want to spend them in the US some time in the future. And such spending will cause inflation of prices.

   Or countries that are accumulating US dollars now may continue to hold them in US government bonds which pay interest. And eventually these interest payments will become so large that much of US tax dollars will end up going to foreign countries instead of being used for the benefit of US citizens.

   None of these scenarios are good. But there is no easy way to cut back on these trade deficits. People in the US are used to live beyong their means. And such a habit is very difficult to break. People will change their spending habits only when economic circumstances force them to.

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   manic on Jun 13, 2011

   I don’t think the people who can do something about this complex issue are home answering Yahoo questions.
   Seek out an economics professor. Or sign up for some college courses.
   Yahoo doesn’t give you enough space to solve world problems with one question and answer.