Trade: Trade Deficits and Imports 
Recommended
Study: Imports and Trade Deficit not a Drag on Growth
In a new study, released by the Cato Institute’s Trade Policy Director Dan Griswold, the case is laid out why imports and a trade deficit are not negative factors of economic growth and why they are, in fact, a boost to the national economy. The study analyzes the past 30 years of U.S. trade policy and outcomes, finding that economic indicators such as "stock market appreciation, manufacturing output, and job growth were all significantly more robust during periods of expanding imports and trade deficits." This Trade Policy Analysis serves as an excellent empirical study applicable to academic topics ranging from economics to political science to foreign policy.
Are Imports a Boon or Bane to the Economy?
Cato trade scholar Dan Griswold addresses the common misconception that rising imports and a trade deficit are bad for economic growth. He demonstrates that imports actually benefit the economy, particularly as half of imported goods are used by producers to create more advanced products, which in turn add much more to economic growth. It's often forgotten, Griswold notes, that "the dollars we spend on imports quickly return to the United States" via purchase of American products or through investments. Those who decry the so-called trade deficit are stuck in misguided Keynesianism, neglecting that every time imports have fallen in the past 50 years the economy has receded.
Trade Deficit with China Not a Bad Thing
The Chinese currency – pegged artificially low against the U.S. dollar – has long been a topic of political debate, and with the current economic crisis some are claiming that the ensuing trade deficit hurts American jobs. Cato scholar Dan Ikenson dispels that myth by explaining how in the globalized economy the U.S. actually benefits from undervalued Chinese currency. He adds that “forcing China to appreciate its currency through sanctions will impose higher prices on American consumers, thereby reducing Americans' real incomes." The current situation allows Americans to benefit twice: once when purchasing inputs for production in the U.S., and again when purchasing final consumer goods from China. Our politicians should be aware that acting on impulse and not fact is setting us up for even harder economic times.