What were the changes in U.S. exports and U.S. imports that led to the trade deficit shrinking in 2019?
A. Exports increased and imports decreased.
B. Imports decreased by less than exports decreased.
C. Exports increased with no change in imports.
D. Imports decreased by more than exports decreased.
The correct answer and explanation is:
The correct answer is: D. Imports decreased by more than exports decreased.
Explanation:
In 2019, the U.S. trade deficit—meaning the gap between the value of imports and exports—shrank compared to previous years. This change was mainly due to a larger decrease in imports relative to exports.
Here’s why:
- Trade Deficit Basics: A trade deficit occurs when a country imports more goods and services than it exports. The size of the deficit depends on the balance between exports (goods/services sold abroad) and imports (goods/services purchased from abroad).
- 2019 Context: In 2019, the U.S. was involved in trade tensions and tariffs with several countries, notably China. These tariffs and uncertainties affected the flow of goods.
- Exports: U.S. exports did not increase in 2019; instead, they either decreased slightly or remained fairly flat due to weaker global demand and retaliation tariffs by other countries. So, exports were not the driver of the shrinking trade deficit.
- Imports: Imports declined more noticeably. The tariffs made imported goods more expensive, reducing the volume of imports. Also, some businesses and consumers bought fewer foreign goods because of higher costs or uncertainty about trade policies.
- Effect on Trade Deficit: Because imports decreased by more than exports did, the overall gap between imports and exports narrowed. Even if exports stayed flat or declined slightly, the sharper drop in imports shrank the deficit.
Thus, the trade deficit reduced in 2019 primarily because of a larger decrease in imports compared to exports.
Summary:
In 2019, the U.S. trade deficit shrank because imports fell more than exports did. The tariffs and trade tensions caused U.S. buyers to reduce imported goods more than the decline or stagnation in exports, narrowing the trade gap. This corresponds to choice D.