Chrysler, Ford and GM are the top automotive manufacturers in America. When the top three automobile manufacturers began to see a decline in their sales, shortly afterwards it lead to a trade deficit and soon after that a drop in employment (Thompson, 2010). When America cannot sell goods to other countries this causes a surplus of domestic goods. In the case of automobiles if there is a surplus there production will slow and eventually stop. This will to the lay-off of workers and the potential to ...view middle of the document...
The trade deficit is a negative impact to the U.S economy. The U.S. buys more than it produces and foreign countries are lending money to the U.S. However, when these countries ask to be repaid the U.S. might not be able to pay it back.
A high exchange rate encourages imports. In the case of the Italian clothing company if they import clothing into the United States and the United States does not have the money to pay it creates a deficit to the company. As Americans purchase more imported items such as Italian clothing, it is taking money out of the US economy and adds to the increasing Unites States deficit. If the Italian company imports too much into the U.S. this will create a surplus, the value of the clothing will not be as great and could potentially be sold at a loss.
Amadeo, K. (2012). About.com. Retrieved from http://useconomy.about.com
Thompson, M. F., & Merchant, A. A. (2010). Employment and Economic Growth in the U.S. Automotive Manufacturing Industry: Considering the Impact of American and Japanese Automakers. Indiana Business Review, 17. Retrieved from http://www.ibrc.indiana.edu/ibr/2010/spring/pdfs/IBR_spring10_Article2.pdf