Trade Deficit Is a Sign of America’s Strength, not a national emergency as falsely claimed by Peter Navarro A trade deficit sounds bad, but it is neither good nor bad. It doesn’t mean the US is losing money. It simply means foreigners are sending the US more goods than the US is sending them. America is getting more inexpensive goods, and in return it is giving foreigners financial assets: dollars issued by the Federal Reserve, bonds from the US government and American corporations, and stocks in newly created firms. That is, a trade deficit can only arise if foreigners invest more in the US than Americans invest abroad. In other words, a country can only have a trade deficit if it also has an equally sized investment surplus. The US is able to sustain a large trade deficit because so many foreigners are eager to invest here. Why? One major reason is the safety of the US dollar. Around the world, from large corporations to ordinary households, the dollar is used for saving, trading, and settling debts. As the world economy grows, so does foreigners’ demand for dollars and dollar-denominated assets, from cash to Treasury bills and corporate bonds. Because the dollar is so attractive, the Federal Reserve gets to mint extra cash for use abroad, and the US government and American employers and families can borrow money at lower interest rates. Foreigners eagerly buy these US financial assets, which enables Americans to consume and invest more than they ordinarily could. In return for our financial assets, we buy more German machines, Scotch whisky, Chinese smartphones, Mexican steel, and so on. Blaming foreigners for the trade deficit, therefore, is like blaming the bank for charging a low interest rate. We have a trade deficit because foreigners willingly charge us low interest rates—and we choose to spend that credit.
US Entrepreneurship Attracts Global Capital—and Fuels the Deficit Another reason for foreigners’ steady demand for US assets is American technological dominance: When aspiring entrepreneurs from around the world start new companies, they often decide to do so in Silicon Valley. Foreigners want to buy stocks and bonds in these new companies, again adding to the US investment surplus. Tariffs, by themselves, do nothing to reduce foreigners’ demand for US dollars, stocks, and bonds. If the investment surplus doesn’t change, the trade deficit cannot change. Instead, the US dollar just appreciates, so that imports get cheaper, undoing the effect of the tariff on the size of the trade deficit. This is basic economics: You can’t have an investment surplus and a trade surplus at the same time, which is why it’s silly to call for both. Rather than reviving US manufacturing, Trump’s extreme tariffs and erratic foreign policy are likely to instead scare off foreign investors altogether and undercut the dollar’s global role. That would indeed shrink the trade deficit—but only by eroding the very pillars of the country’s economic dominance, at a steep cost to American firms and families.
https://www.bea.gov/data/intl-trade-investment/direct-investment-country-and-industry The foreign direct investment in the United States position increased $227.0 billion to $5.39 trillion at the end of 2023. The increase mainly reflected a $96.0 billion increase in the position from Canada and an $86.1 billion increase from Europe, primarily a $58.9 billion increase from Germany. By industry, affiliates in manufacturing increased the most, increasing $58.6 billion to a total investment position of $2.22 trillion.
We buy cheap goods and make the China's rich, then China buys up all of our real estate, technology and resources. What could possibly go wrong in this zero sum game of money over national prosperity? The deficit itself isn't the issue Navarro is making it out to be. He's all over the place. It's the unfair trade practices these other countries have imposed on the US while turning themselves into one dimensional manufacturing powerhouses using slave labor. All it does it widen the extremes. College loan forgiveness does nothing if there's a low ceiling on job salaries. Americans would rather make more and spend more on goods than make less and have a shopping spree at the dollar store.
CircleTheDrain, if only you'd specify the "unfair trade practices" that other countries place on the US you also need to stop parroting the false / stupid claim of "slave labor"; such parroting underscores you willful ignorance
It's a fact - officials from both parties have used the term "slave labor" in press briefings over the past 2 years. So why biased? Are Chinese interests, which they circumvent the law to gain an edge, more important to you than the health of America as a nation? Egregious-Cases-of-Chinese-Theft-of-American-Intellectual-Property.pdf Takeaway: The Huntsman case shows how reviews can be used to extract key technology from foreign companies and reveals how due process in China is a façade. Takeaway: The Chinese government fosters an environment that condones theft of foreign technology in strategically important sectors. Takeaway: China blocks its GMO seed market from foreign competition and encourages indi viduals to take any action—including picking up seeds on a country road—to obtain needed technology. Takeaway: The Motorola case displays how China poaches talent from U.S. companies to ac quire trade secrets and uses all regulatory tools to punish and pressure individual companies. Takeaway: China goes to great lengths to identify emerging technologies and steal know-how and trade secrets. All companies eager to win large contracts are susceptible to such coercion Takeaway: The DuPont example illustrates how China infringes patents, manipulates its IP system, and weaponizes antitrust to coerce technology transfer. China is a country of no moral culpability or innovation - they shamelessly steal, grift and poach American technology and use their slave labor workforce to scale it up. They also place assets... perhaps like you... throughout American institutions to act as hall monitors and constantly purvey weaknesses they can exploit.
Saying captain obvious when we have a president who calls trade deficits "foreign countries ripping us off" is kinda funny. You have to admit it. Come on. You gotta.
What problems...he thinks you can run infinite debt in the hundreds of trillions forever and dumb foreigners will degen their way into buying even more infinite debt. As long as he can read chartz to gamble on options, he's a-ok. And if there's a prolonged war with China, we can print even more magic money to buy tanks, drones, and missiles that Ukraine waited months to get because everyone else are idiots. Not sure if he's a China shill or straight up useless idiot.
https://en.m.wikipedia.org/wiki/Triffin_dilemma When you control the supply of the world's currency of course you're going to be an importer nation.
When we keep generating government deficit and create money, either you get imports or you get inflation. If we really have no trade deficit, what will be the inflation rate be?
the US has been a vivid eg of this economic approach ever since the early 1970 US dollar got off the (convertibility to) the gold standard US, via Nixon/Kissinger/Simon, the petro dollar agreement w the Saudi, cementing the US dollar as global reserve stupidity is continuing to bash this US economic approach, one that has enabled the US economyto be the strongest in the world since FDR clamor for another approach, one, as parroted by Invisible, is supposed to be better but, it is just an idea on paper, with no living eg invisible has been the same fool that parrots these false claims the Fed is wrecking its balance sheet China doesn't need the petrodollar
