How do countries conduct trade in the global economy?
The United States plays an active part in the global economy. U.S. trade with other countries has expanded in recent decades and has contributed to economic growth both at home and abroad.
Why is global trade growing in importance? Various factors have contributed to the growth of global trade. Chief among these are advances in transportation and communications, which have made it easier for countries to do business and move goods around the world. New and differentiated products have also stimulated global trade.
What goods and services do countries trade? Manufactured products are the main category of exports among nations. Agricultural and mineral commodities-notably oil-are also important. Services in such areas as finance, transportation, education, and information also make up a key component of overseas trade.
How and why do countries regulate trade? Although free trade makes economic sense, most countries find reasons to restrict trade. Usually they do so for political reasons, erecting trade barriers-such as tariffs and quotas-to limit imports in order to protect domestic industries. Such restrictions benefit specific industries at the expense of consumers and producers in other industries.
How is global trade financed? Importers and exporters finance global trade by trading currencies on the foreign exchange market. Exchange rates fluctuate based on supply and demand. Governments may try to influence rates through trade policies and other means. When countries have a negative balance of trade, or a trade deficit, they generally finance their deficit by getting loans or investment capital from abroad.