Imports, Exports, and Exchange Rates: Crash Course Economics #15

Hi I'm Adriene Hill and I'm Jacob Clifford and welcome to Crash Course Economics.

Today we're going to talk about international trade. So we all know our stuff is from everywhere.

Bangladesh, China, Vietnam, China again,

but what does it actually tell us about the global economy or the US economy?

And who's is benefitting from all this trade. And who's gonna clean all this up?

[Theme Music]

International trade is the lifeblood of the global economy. Basically when a good

or service is produed in, let's say, Brazil and sold to a person or business in the

US, that counts as an export for Brazil and as an import from US. As you might

expect, the United States is the world's largest importer because Americans love

their stuff. In 2014 Americans import over two trillion dollars worth of stuff,

like oil cars and clothing from countries all over the world. And if you

look around your local big box store, it feels like everything is made in China.

And we do import a lot of things from China but in terms of both imports, and

exports our largest trading partner's not China, it's Canada. The US and Canada trade

over six hundred billion dollars worth of goods and services each year.

The US imports a lot from Canada but exports almost as much. In fact, the United States is

the world's second-largest exporter. It sells high-tech things like

pharmaceuticals, jet turbines, generators and aircraft to countries all over the world.

It also exports intellectual goods like Kanye West albums and Pixar movies as

well as bulk commodities like corn, oil and cotton. The annual difference between

a country's exports and imports is called net exports. So if Brazil exports 250

billion dollars worth of goods and imports 200 billion that its net exports

are fifty billion. That means Brazil has a trade surplus. In 2014, net exports in

the usmore negative 722 billion dollars. That's what you call a trade deficit.

Some people assume that having a trade deficit is inherently bad. Why does the

US import nearly all of clothing? Why can't we clote ourselves?

US producers could easily make more than enough clothing to keep all of us

dressed. But they don't because they focus on other things that they're better at

producing. The US buys clothes from other countries because we can get them

cheaper than if we made them here. This is the value of international trade. It

doesn't make sense to make everything on your own if you can trade with other

countries that have a comparative advantage. It's worth mentioning here

that these savings sometimes come with other costs, especially for the people

who are producing these goods overseas. Unsafe and unfair working conditions, and

environmental degradation can be ugly side effects of

internnational trade. And we're gonna talk about that. For today though let's get a handle

on trade deficits. It can seem like exporting would make a country wealthy

while importing would make it poor. After all, if we buy products produced in other