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[Video]Is the US trade deficit a bad thing?

Posted: May 20th, 2018, 4:28 am
by aRNoLD
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$566B, America's current trade deficit with the rest of the world. President Trump calls it a disaster, proposing protectionist trade measures to fix the imbalance.

But is a multi-billion dollar trade gap always a bad thing?

A trade deficit reflects the balance of a trade, meaning the diff and value between a country's exp and imp. A nation has a deficit if it imports more than it exports.

In 2017, US bought $810B more total goods than it sold. Things like clothes, electronics & autoparts. Trump says that is a problem, but he misses an important point. That value is just for goods, and the US is no longer just a manufacturing economy. It's now service based, too. Think finance, media, tech, and in terms of services, the US has $244B trade surplus. Put together, that leaves US with an overall deficit of $566B.

But a trade deficit is not inherently good or bad. Sometimes it's even a symptom of a strong economy. After all, US deficit grew during economic boom times of late 1990s and early 2000. That's because US economy is driven by the US consumers and they love cheap imported goods.

On the flipside, a trade surplus doesn't necessarily mean all is well with economy. The last time America had one, Gerald Ford was the president, and the US was in the middle of a recession.