Context: It has not been uncommon for political and media pundits to point to the so-called trade deficit in the United

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Context: It has not been uncommon for political andmedia pundits to point to the so-called trade deficit in the UnitedStates as a point of weakness and vilify its supposed foreignculprits. For decades, the United States has carried a persistentdeficit in trade of goods and services which is particularly largefor trade with China. Many have suggested that this is the resultof unfair practices including manipulation of its exchange ratewith the US dollar and disregard for intellectual propertyrights.
To what extent are such claims legitimate? Are deficitsinherently indicative of weak economic performance? Are foreigncompanies primarily responsible for trade deficits? In what waysare the simplistic concerns regarding trade with China misguided?In what ways are concerns more valid? What are the risks of effortsto manage these issues without an understanding of the complexnature of trade relationships? In completing your response pleasedevelop your argument using the official methods of measuring thebalance of payments including a brief description of its componentsand how these flows are measured. Explain the consequence ofefforts to manipulate the nominal exchange rate on other factorswhen considering the real rate of exchange of goods betweencountries. Finally, make sure to discuss the relationship betweentheses deficits and private savings, investment, and governmentdeficits and why efforts to reduce trade deficits throughincreasing tariff rates on imports might not result in intendedoutcomes.