How important are net exports for the U.S. GDP in comparison to European countries?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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First, we must note that net exports do not directly help the gross domestic product (GDP) of the United States at all.  The US consistently has the world’s largest trade deficit.  This means that net exports always (in recent history) act to decrease our GDP. 

Second, we must note that not all European countries are in identical situations with regard to net exports.  For example, the United Kingdom is second only to the US in terms of the size of its trade deficit.  By contrast, Germany has one of the highest trade surpluses in the world.  The European Union as a whole also has a trade surplus. 

Looked at in this way, then, net exports are much less important to the GDP of the US than they are to the GDPs of many countries in Europe and of the EU in general.

We can, however, argue that the trade deficit is actually beneficial to US GDP in an indirect way.  Our trade deficit comes about in part because we import so many consumer goods.  This means that Americans are not having to make these goods.  This frees up more of the American workforce to get better education or training so they can take jobs that are better than manufacturing jobs.  In this way, it can be argued that our negative net exports actually help our GDP in an indirect way.

 

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