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Is the merit to the argument of reducing the US trade deficit and the inequitable tariff regime imposed by its trading partners that works unfavorably towards the US. Does this give merit to the argument of comparative advantage if its trading partners are going to charge higher tariffs on US goods entering their countries yet the US charges lower tariffs on the same goods entering the US from those countries e.g US charges 2.5% tariffs on Chinese cars yet China charges a 15% tariff on US cars entering China.

Does this trade imbalance that evidently results in trade deficits, quantities aside or better, less revenue and quantities sold for US companies. Does it merit having to support the US dollar as the reserve currency, a drop in potential profit growth wage growth and wealth growth. In essence do trade deficits support the reserve currency status of the US dollar or do they suppress or diminish it?

I gather a country with trade surpluses would have a stronger currency, because its goods enjoy the largest demand and so it is always desirable to hold that currency as a reserve in order to buy those goods. How can trade deficits ever be desirable?

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  • $\begingroup$ I gather prematurely accepting answers discourages others from giving answers. Moreover, accepting an unsatisfactory answer is not good practice generally on this SE and generally on the entire SE site. I have not been given an acceptable answer to my question. I will wait a little bit longer for better answers. I hope you are not campaigning for downvoters $\endgroup$ – securitydude5 Mar 12 '18 at 14:25
  • $\begingroup$ to my merit, I did up vote the answer. However until I get an answer that answers ALL my questions, I will not be accepting $\endgroup$ – securitydude5 Mar 12 '18 at 16:46
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    $\begingroup$ I read the question, and I cannot tell what it is asking. You need to ask a single question of limited scope on order to get an answer. This question has something like a half dozen questions in it. It would require a 4000 word essay to address them all. $\endgroup$ – Brian Romanchuk Mar 12 '18 at 17:51
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Trade deficits can be desirable if people are still willing to purchase your currency. Why would they be willing to purchase your currency? For multiple reasons. The US is still relatively stable, it has the reserve currency, and the strength and stability of the United States give governments and investors confidence in investing here, buying bonds, and stacking dollars. In the United States scenario, it has been desirable to increase deficits in the short-term, because it has led to the ability to consume without producing in proportion. We can essentially live beyond our means in the United States without experiencing severe inflation in the short-term. How this all ends is a debate for economists more advanced than me, but based off of modern economic theory, deficits can be desirable if the consequences of inflation or offset.

The tariff on the other hand has negative and positive consequences. In the short-run, it can benefit the steel industry by increasing the price of steel, and forcing American companies to buy American. However, the marginal cost is how much much more it costs every other industry to buy the steel, which may outweigh the marginal benefit of the increased price of steel for the steel industry. This can also lead to less steel being demanded, which will eventually hurt the steel industry itself. A tarrif in this situation has marginal benefits (increased steel prices in the short-run) and marginal costs(the cost of steel to every other industry).

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Just because you have a trade deficit with the grocery store does not mean you would be better off growing your own food.

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