Question

What are the major issues with regard to trade imbalances for low- and middle-income countries?

Short answer

Maintaining a trade balance is significant for low to middle-income countries, if they import too many goods the value of their currency decreases which can make it impossible to keep up with competitive international markets.

Step-by-step solution

Step 1. Define trade imbalance.

A trade imbalance occurs if a country's net exports or imports are higher than the other. When this occurs the value of the currency will be disrupted, altering domestic citizens' ability to purchase goods.

Step 2. Major issues with regard to trade imbalances for low- and middle-income countries.

If a country's imports massively outweigh its exports, this means the country's currency is abundant in the international market, making it less valuable. This will lower the prices of their exports as the value of their currency falls, furthering the trade imbalance.
If a country exports more than it imports then the value of its currency will increase, resulting in inflation. This will drive up domestic prices and make the cost of living higher.