The world has become increasingly more globally interdependent as nation-states have grown dependent on foreign trade and investment to sustain their standard of living. The global marketplace for trade has expanded, and along with it, global trade policy has grown in importance for the majority of the world’s most industrialized countries. The United States consistently runs a trade deficit. The U.S. trade deficit is causing the American standard of living to become increasingly dependent on foreign investment to finance the deficit, while many other industrialized countries, such as Germany or Japan, consistently run trade surpluses, or at the very least, manage a trade balance. The differences among these countries may very well lie in their fiscal and monetary policies, particularly in regard to trade issues.
The research question that this study addresses is: Why has the United States not actively pursued policies to create trade balances or surpluses in recent years? The study will test whether direct linkages between central banking monetary policies and national trade deficits or surpluses exist, with specific emphasis on the U.S. Federal Reserve System, and why policy makers should or should not concern themselves with trade imbalances in an increasingly economically interdependent world. The United States is the country analyzed in the case study, with pertinent comparisons being made to Germany when comparative analysis is helpful in explaining monetary policy or trade policy in relation to institutional power. The