Which statement accurately describes a trade deficit

Which statement accurately describes a trade deficit? Responses China has a trade deficit with the U.S. China has a trade deficit with the U.S. The net balance of trade is a deficit so the U.S. has a trade surplus with Australia. The net balance of trade is a deficit so the U.S. has a trade surplus with Australia. Mexico has a trade deficit with the U.S. Mexico has a trade deficit with the U.S. There is only one trade balance per country with the U.S.

The Correct Answer and Explanation is:

The correct statement is: Mexico has a trade deficit with the U.S.

Explanation:

A trade deficit occurs when a country imports more goods and services than it exports. In this scenario, the country is spending more on foreign goods than it is earning from its exports. The net result is a negative trade balance.

In the case of Mexico and the U.S., Mexico imports more from the U.S. than it exports to the U.S., which creates a trade deficit for Mexico. This is commonly observed in countries that import a significant amount of goods from a major trading partner like the U.S.

Let’s break down the other options:

1. China has a trade deficit with the U.S.: This statement is incorrect. In reality, China has a trade surplus with the U.S., meaning China exports more goods to the U.S. than it imports from the U.S. This has been a significant factor in global trade dynamics.
2. The net balance of trade is a deficit so the U.S. has a trade surplus with Australia: This statement is somewhat confusing. The net balance of trade being a deficit for the U.S. with other countries would indicate that the U.S. imports more than it exports from those countries. However, if the U.S. has a trade surplus with Australia, it means the U.S. is exporting more to Australia than it is importing from there. The statement incorrectly implies that a deficit balance could correspond to a surplus with Australia, which is not logically sound.
3. There is only one trade balance per country with the U.S.: This statement is misleading. While a country like Mexico has one trade balance with the U.S., the U.S. has different trade balances with various countries. Each relationship between countries has its own trade balance based on imports and exports. Therefore, there can be multiple trade balances between the U.S. and different countries.

In summary, a trade deficit refers to the situation where imports exceed exports, and Mexico is an example of a country with a trade deficit with the U.S.