US Trade Balance Analysis on Imports and Exports Based on ETS and ARIMA Models

There are concerns over keeping the U.S. trade deficit at a high level for long since trade deficit can potentially lead to a financial crisis. Different studies hold different opinions in terms of the future U.S. trade balance, and this study intends to forecast its near future value from the time series analysis perspective. Two classic time series models based on the imports and exports series are being used, respectively ETS and ARIMA models. The results show that the future trade balance have a higher chance to be fluctuate at the current level than to be deteriorate. However, the circumstance is unlikely to be mitigated based on the model predictions. This prediction of non-decreasing trade deficit can be a hidden threat towards the U.S. economy.