A country’s trade account reflects the balance between the value of its imports and its exports. If a country imports are less than it exports, it will have a trade surplus. A trade deficit, simply put, means that a country is exporting less than it is importing. A trade deficit indicates that more of a country’s currency is channeled to other nations than the amount flowing back to the country’s economy. In 2015, as per the data from the International Monetary Fund, national economies with the worst trade account balances were:
The United States recorded a trade deficit of $484.1 Billion. The deficit has been piling up since the 1990s when national and individual savings were at an all-time low. The United States' government was investing more money abroad to buy goods, services, and even assets. The United States has also experienced a steady increase in productivity which has put more money in people’s hands to spend on imported goods.
The United States has had to borrow from other countries in an attempt to finance this deficit. The United States' deficit portrays an increase in global savings since countries have huge of money to lend the country. The largest trade deficit is with China which exports more than it imports from the United States, followed by Germany, Japan, and Canada. Automobiles and consumer products are the largest contributors to this deficit.
The United Kingdom ranked second with a deficit of $146.9 Billion. The expanding trade deficit in the United Kingdom can be traced back to 1998 where national savings started declining. Years of increasing demand for customer products and declining oil and gas production for exportation have been major contributors to the trade deficit.An estimated 53.6% of its exports were to countries in the EU followed by 22.5% to Asia. The EU countries imported fewer goods, services, and assets than they exported to the United Kingdom, and this contributed to most of its deficit. Top countries that contributed to this shortfall were Germany ($46.1 billion), China ($33.9 Billion), and the Netherlands ($20.3 Billion).
Brazil had a trade deficit of $58.9 Billion. Since 2014, Brazil’s economy has been going through recession which caused an impediment to its growth. Brazil’s currency experienced a decline in value which meant that Brazilians had less money to spend on imports from other countries. The value of goods exported to other countries such as iron ore and petroleum countries also fell in value due to a decrease in demand. China, the United States, and Argentina were the top destination countries for Brazil’s exports.
A trade deficit of $58.4 Billion was recorded in Australia. Exports such as iron ore, minerals, and coal decreased in value in 2015. Australia exports most of its commodities to China, Japan, South Korea, and the United States. The country import capital goods and does not have an extensive base of exports to match these imports. This trade imbalance causes the value of imports to be more than the value of exports. Efforts to boost its manufacturing industry, however, may decrease their imports and affect the trade accounts from the source countries. Low levels of national savings have increased borrowing from abroad increasing the external debt and further worsening the trade account.
Negative Trade Balances Elsewhere In The World
Other top countries that recorded large trade accounts deficits were Saudi Arabia ($53.5 Billion), Canada ($51.7 Billion), Turkey ($32.1), Mexico ($31.7), Venezuela ($20.4 Billion) and Colombia ($18.9 Billion). The trade deficit for most of these countries has been consistent in the previous years. Reducing savings and more spending by their citizen’s means that there are inadequate funds for the government to borrow domestically. Countries resort to borrowing abroad to finance their investments, and this leaves the countries with large amounts of foreign debt. Massive trade deficits are, however, not sustainable in the long run, and there is a need for measures to address this.