Trade deficit isn't the crisis Trump makes it out to be

By Tarek Alexander / For The Conversation

When President Trump imposed sweeping new tariffs on imported goods on April 2 — upending global trade and sending markets into a tailspin, but now largely paused for 90 days — he presented the move as a response to a crisis. In an executive order released the same day, the White House said the move was necessary to address “the national emergency posed by the large and persistent trade deficit.”

A trade deficit — when a country imports more than it exports — is often viewed as a problem. And yes, the U.S. trade deficit is both large and persistent. Yet, as an economist who has taught international finance at Boston University, the University of Chicago and Harvard, I maintain that far from a national emergency, this persistent deficit is actually a sign of America’s financial and technological dominance.

The trade deficit is the flip side of an investment magnet: A trade deficit sounds bad, but it is neither good nor bad.

It doesn’t mean the U.S. is losing money. It simply means foreigners are sending the U.S. more goods than the U.S. is sending them. America is getting more cheap goods, and in return it is giving foreigners financial assets: dollars issued by the Federal Reserve, bonds from the U.S. government and American corporations, and stocks in newly created firms.

https://www.heraldnet.com/opinion/comment-trade-deficit-isnt-the-crisis-trump-makes-it-out-to-be/