The Trade Deficit and U.S. Competitiveness

The U.S. merchandise trade balance soared to $132 billion in 1993, the highest level since the record of $160 billion in 1987. ¹ Although the large trade deficits of the late 1980s were widely attributed to an overvalued dollar, the dollar has depreciated substantially since that time. In this context, the persistence of relatively large trade deficits once again raises the question of whether there is an underlying structural decline in competitiveness about which American policy makers should be concerned.