American officials viewed the trade balance with mixed feelings. Inexpensive foreign imports helped prevent inflation, which some policy-makers viewed as a potential threat in the late 1990s. At the same time, however, some Americans worried that a new surge of imports would damage domestic industries. The American steel industry, for instance, fretted about a rise in imports of low-priced steel as foreign producers turned to the United States after Asian demand shriveled. And although foreign lenders were generally more than happy to provide the funds Americans needed to finance their trade deficit, U.S. officials worried that at some point they might grow wary. This, in turn, could drive the value of the dollar down, force U.S. interest rates higher, and consequently stifle economic activity.
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This article is adapted from the book "Outline of the U.S. Economy" by Conte and Carr and has been adapted with permission from the U.S. Department of State.