The US has had a trade deficit since 1975, so is the US trade deficit really such a bad thing?
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Everybody has a trade deficit with somebody. You have a massive trade deficit with your grocery store, for example. You (likely) don’t produce much of anything they sell and you are far better off because of it. Same goes for the electronics store, clothing stores, etc.
The things we don’t produce because they are produced more cheaply elsewhere frees up labor to produce other goods and services, many of which are worth even more than the goods we don’t produce.
The trade deficit is a *good* thing. To paraphrase Milton Friedman, exports are the cost of international trade, imports are the gains.
The people who complain about the trade deficit are making the mistake of thinking money, by itself, has value. That is not the case. Money is only as valuable as the goods and services it can buy. Imports increase the goods available to you, exports decrease those goods. This isn’t to say exports are bad, but *the purpose of exports is to help buy imports.*
No, the US sell services and imports goods. If I make a killer app worth a trillion dollars, that doesn’t count as an export. If I use my new-found wealth to buy German cars, that gives America a trade deficit.
In other words, the US gets rich via tech, finance, things that aren’t counted as exports. The money people make doing this stuff is used to buy things in countries where it’s cheaper to make it and ship it.
The US can fill trade deficit via it’s foreign policies, mainly the petrodollar. SA agreed to only accept USD for purchasing of oil, so everyone (for now) needs to buy USD which fills in the gap.
It helps when you’re the #1 military power in the world
Short answer: no.
International economics are insanely complicated, so longer answer would be that it could be a problem if things changed. As it stands right now it’s not a big deal.
It basically means we’re spending more than we’re making for trade, but it’s not like we aren’t getting stuff. I have a personal 100% trade deficit with my local grocery store. I only ever give them money but I get food in exchange.
Our economy is service based and consumption fed so it makes sense we import more than export. Consumption represents 70% of the GDP
You cannot be a reserve currency without running a massive federal deficit, so in order to maintain world currency status, deficits are structurally required.
TLDR: it’s lunchtime and you really want snakpacks. But it is not just you, it’s fucking everyone. But that kid over there, billy, his mom gives that fucking kid like 12 snakpacks a day. So you trade your carrots to Jenny, who promises to trade her oatmeal cookies to Katy, who billy has a crush on to get the snakpaks.
So at the end of the day billy has like zero fucking snakpacks, Jenny has your carrots and katy has an oatmeal cookie and you have like 1/2 a snakpack but Jenny owes you the other half tomorrow. Everyone traded in snakpacks but used other items, but the price was in snakpacks because everyone agreed that is what is the best. Billy has all the other stuff except the snakpacks, the system breaks down if he just hordes them, because money is debt.
Several years ago, The Economist added all countries reported deficits and surpluses. The result was an overall earth deficit roughly equal to that reported by the USA.
The technical term for the USs situation is a Trade Deficit, but what it actually is, by design, is the US buying influence and allegiance from its trading partners.
Everybody has a trade deficit with somebody. You have a massive trade deficit with your grocery store, for example. You (likely) don’t produce much of anything they sell and you are far better off because of it. Same goes for the electronics store, clothing stores, etc.
The things we don’t produce because they are produced more cheaply elsewhere frees up labor to produce other goods and services, many of which are worth even more than the goods we don’t produce.
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