President often warns Americans about the country’s trade deficit. So US is losing, right?
According to U.S. President Donald Trump, trade deficits is the clearest indication that Americans are getting rolled as it sells fewer goods and services than it buys from rest of the world. Mr. Trump’s portrayal of trade deficits indicates country’s crucial departures from economic reality.
“The trade deficit is not an indicator of our weakness, it’s actually an indicator of our strength,” says Klein.
According to Klein and Branstetter, Americans have money to buy from rest of the planet for what they sell, therefore, US is running a deficit.
Trump has talked about the jobs that have been lost due to trade and he concluded with one of his statements that, “Our trade deficit in goods with the world last year was nearly $800 billion.”
Nearly $350 billion was the US’s bilateral trade deficit with China last year, nearly half of the overall trade deficit.
Economist Lee Branstetter, with Carnegie Mellon University in Pittsburgh, adds, “Mr. Trump has not done his homework, and he’s got it quite wrong.” He also said, “Some of this foreign money helps fund our high-tech startups. This inflow of capital keeps mortgage rates low.”
“That’s a really wrongheaded way of looking at this,” says economist Michael Klein with the Fletcher School at Tufts University, just outside of Boston.