Why Do We Have A Trade Deficit?

[dncc]

It seems to me that the reason we have a trade deficit is that we have a lot of money and we want a lot of toys. Recently I did a "spring cleaning" and found my four laptops that I don't use, my two tablets, my multiple cell phones that are from companies that no longer even exist.... I can't imagine how much food I've thrown out over the years from either never having cooked it or not eating the leftovers. I'm on (in my mid fifties) probably my fifth car. We're a consumer society. It seems like a hallmark of our greatness that we not only support domestic industry but also run a trade deficit to boot.

Is this a bad thing?

Having a trade surplus seems like a worse proposition if we jack up the prices at the store so much that we buy less.

 

[Gozaburo]

It seems to me that the reason we have a trade deficit is that we have a lot of money and we want a lot of toys.

Why does the king eat and don fancy clothes while the peasants go hungry in their rags?

I'm not a free trade dogmatist, but trade cannot be viewed in a vacuum. America is the dominant global empire. It follows that our vassals will do peasant labor while we pursue conquest, higher learning, technology etc.

 

[Gatsby]

Mainly because the median American has more money than the median person in most other countries. There are other reasons too, but that's the biggest one.

 

[Ishm]

There are a bunch of contributing factors to the US having a trade deficit, but tariffs charged by other countries are only a small part of the picture. Take autos as an example. The claim is that other countries tariffs prevent US made autos selling overseas. But you only have to look a markets where US autos are not tariffed, or tariffed at the same rate as other countries autos, and you see the real issue.

The real issue is that US manufacturers build for US consumers. And US consumers don't always want what other countries consumers want. Other countries have smaller roads and smaller parking spaces. Especially older developed countries like in Europe. I would have never considered owning an F150 or a large SUV etc in the UK because it just wouldn't have fitted into a lot of the public infrastructure. I can remember pulling in the wing mirrors on my 5 series BMW to get down a narrow street in an English village.

In many countries their fuel costs are much higher, and fuel economy drives a lot of buying choices. If I look around me here in New Zealand for instance, American cars generally only fill niche markets due to their size, fuel consumption, and cost. The market here is dominated by Japanese, Korean, and Euro brands producing cars that better fit the local consumers because the consumer need here is more similar to the home markets in those countries. On the other hand, Tesla has done well here among the EV brands because the cars fit the local preferences for size etc.

Putting the lack of US auto exports down to tariffs is true, but only in a small part. Mostly it's just not the right product for the mass external markets.

The cost of manufacturing in the US is a much bigger hinderance to US exports than external tariffs. If China can make a widget for $10 and the US makes it for $20, other countries who aren't discriminating country by country with tariffs (until now at least) will buy the $10 ones from China. The only way to fix that long term is to get the cost of US widget production down. Trouble with that is that will require robotic production which doesn't help create all those millions of jobs Trump talks about giving to his cult. Or of course a massive drop in US living standards, which is looking more likely than ever based on Trumps current policies.

 

[BabaVoss]

None of the above.
Trade deficits are NORMAL.
Two countries engage in trade.
Unless they buy exactly the same amount as they sell to each other there will be a trade imbalance.
It would be unusual to have perfectly balanced trade - and it would be fleeting.

 

[forn]

None of the above.
Trade deficits are NORMAL.
Two countries engage in trade.
Unless they buy exactly the same amount as they sell to each other there will be a trade imbalance.

That's true, but we have a very large trade deficit.
There are many reasons for this. Should have made the poll "vote for as many as you like".

 

[soap box]

None of the above.
Trade deficits are NORMAL.
Two countries engage in trade.
Unless they buy exactly the same amount as they sell to each other there will be a trade imbalance.
It would be unusual to have perfectly balanced trade - and it would be fleeting.

I totally agree but I thought the question was more about the US has a deficit. And a different US imbalance for every single country which shows every country has imbalances for all other countries except for volcanic islands with seals and penguins.

Surely you meant more than normal,
My answer is we're a wasteful and gluttonous culture.

 

[medi]

I have been trying to find out who here has actually been properly studying the issues related to trade and this Google search result is mighty interesting:



I went to that other thread that has a very strange title and found what is very common in so many threads, significant trash language that has an intellectual value that shouldn't be posted here. But there was one attempt, it seemed, at some show of studying the issues at hand.

BUT, you see that image up there of that ice fishing creature? Well, that resulted from my trying to see who in this Community had actually posted the link to that "Foreign Trade Barriers" report:

https://ustr.gov/sites/default/files/files/Press/Reports/2025NTE.pdf

This March 1st report is 397 pages long.

I think I remember the 2024 report was over 400 pages long.

And if memory serves, these reports go back to about the mid-80s.

Still, I am sort of wondering who in this Community has actually read any substantial number of pages of any of those reports; 2024 or 2025?

I get it that the majority of you are simply interested in getting "I Love You!" points from your fellow members and that comes from who can come up with the best trash language, sort of like working at an advertising company; but some of you here must have some other aims for being a participant in discussions here, no?

Maybe the "aim" of learning something?

All you folks honestly believe the complexities of international trade can be summarized in 10 word sentences that contain five beautiful trashy words?

I'm sort of hoping some of you really would like to understand what's going on around this planet, when it comes to trade. So I provide the results of the search I did and why and the link to that report.

By the way, a little bit of 'street level' information with questions:

A bag of rice at the base commissary costs about one half the cost of a bag of rice on the local economy (Japan and the ROK). I wonder why? Rice grown in the U.S. is just about impossible to find, even in a large city in both Japan and the ROK. I wonder why?

Have any of you tried to study anything related to China?

BORING COMPLIANCE HOUSE 无聊合规社 [wúliáo hé guī shè]
白纸黑字 · 快速专业
Hong Kong SAR | Mainland China PRC
中国 香港 | 内地

美国贸易代表办公室发布 2025 年国家贸易评估报告

2025 年 3 月 31 日美国贸易代表办公室 (USTR) 向特朗普总统和国会提交了 2025 年国家贸易评估 (NTE)。NTE 是一份年度报告，详细说明了美国出口商面临的对外贸易壁垒以及 USTR 为减少这些壁垒所做的努力。格里尔（Ambassador Greer）表示：“现代历史上没有一位美国总统比特朗普总统更了解美国出口商面临的广泛且有害的对外贸易壁垒。在他的领导下，本届政府正在努力解决这些不公平和不互惠的做法，帮助恢复公平，并让勤劳的美国企业和工人在全球市场上占据首位。”2025 年 NTE 的调查结果强调了特朗普总统的“美国优先”贸易政策和总统的 2025...

www.boringcompliance.com

So I have broken the unwritten rule around here that I am supposed to trash some other human or I get no brownie points, but - - - well, I'll apologize for rowing my little boat in the opposite direction most of you are going. Just wave good bye as I pass you. Oh yes, and please use cool trash language when you go after me. At least I might instill some new trash language in some of your minds. You know, super clever trash stuff. Us old folks should receive special trash language. Something like Mick Jagger might utter.

 

[aociswundumho]

Why Do We Have A Trade Deficit?

There is no deficit.

If an American buys a truckload of lumber from a Canadian for 10k, then the American gets the lumber and the Canadian gets the 10k. They are both better off, that's why they made the trade. There is no deficit, if anything there is a small surplus on both sides.

 

[Juks]

It seems to me that the reason we have a trade deficit is that we have a lot of money and we want a lot of toys. Recently I did a "spring cleaning" and found my four laptops that I don't use, my two tablets, my multiple cell phones that are from companies that no longer even exist.... I can't imagine how much food I've thrown out over the years from either never having cooked it or not eating the leftovers. I'm on (in my mid fifties) probably my fifth car. We're a consumer society. It seems like a hallmark of our greatness that we not only support domestic industry but also run a trade deficit to boot.

Is this a bad thing?

Having a trade surplus seems like a worse proposition if we jack up the prices at the store so much that we buy less.

YOU DON'T. Services provided by your largest companies: Meta, Alphabet, X, Apple, Microsoft, Amazon, and others are not counted in the export statistics. If they were, you would instead be running a trade surplus, at least with the EU."

 

[medi]

And just to give you an idea of the vast amount of very good information you can obtain from studying what's been going on for many years, here is an excerpt from page 385:

ENVIRONMENT
In October 2020, the U.S. Trade Representative initiated a Section 301 investigation into Vietnam’s acts, policies, and practices related to the import and use of illegal timber, and in particular, to examine reports that Vietnam’s wood processing industry relies upon imported timber that may have been illegally harvested or traded. On October 1, 2021, the United States and Vietnam signed an agreement (Timber Agreement) that addresses U.S. concerns in the investigation. The agreement secures commitments that will help keep illegally harvested or traded timber out of the supply chain, and protect the environment and natural resources.

The United States held working group meetings with Vietnam in 2022, 2023, and 2024. Also in 2024, the United States and Vietnam coordinated to organize two workshops on timber trafficking and promote the legal timber trade for Vietnamese officials and businesses. The United States will continue to monitor Vietnam’s implementation of its commitments under the Timber Agreement.

 

[dmpi]

Mainly because the median American has more money than the median person in most other countries. There are other reasons too, but that's the biggest one.

The national debt per person is $106,000. The average household debt is $105,000. Some Americans have a lot of money by world standards but I wound't say the median American is doing all that well.

 

[dncc]

None of the above.
Trade deficits are NORMAL.
Two countries engage in trade.
Unless they buy exactly the same amount as they sell to each other there will be a trade imbalance.
It would be unusual to have perfectly balanced trade - and it would be fleeting.

Well yeah, in a vacuum if the 2 countries are equally situated.

If the average income of one nation is much larger than the other nation, the imbalance is only going to be natural. Additionally, the natural resources of Nation A vs. Nation B (including the intellectual resources) can play a role.

You're not wrong but there is more too it than that.

 

[dncc]

YOU DON'T. Services provided by your largest companies: Meta, Alphabet, X, Apple, Microsoft, Amazon, and others are not counted in the export statistics. If they were, you would instead be running a trade surplus, at least with the EU."

Interesting.

 

[BabaVoss]

Well yeah, in a vacuum if the 2 countries are equally situated.

If the average income of one nation is much larger than the other nation, the imbalance is only going to be natural. Additionally, the natural resources of Nation A vs. Nation B (including the intellectual resources) can play a role.

You're not wrong but there is more too it than that.

I believe we are saying the same thing.

 

[medi]

YOU DON'T. Services provided by your largest companies: Meta, Alphabet, X, Apple, Microsoft, Amazon, and others are not counted in the export statistics. If they were, you would instead be running a trade surplus, at least with the EU."

If I may be allowed to display how stupid I am, how does Microsoft "export" services?

If I can't fix my computer and I take it to an authorized Microsoft vendor here in Japan, did Microsoft export the service done to fix the computer?

Or are you referring to some other sort of service not related to individuals? Maybe exporting a "service" to JAXA?

Just curious. Not trying to start any arguing.

 

[upsideguy]

The national debt per person is $106,000. The average household debt is $105,000. Some Americans have a lot of money by world standards but I wound't say the median American is doing all that well.

Because of the acute wealth disparity in the US, using averages in discussing the economics of Americans is grossly misleading. Do you know the average net worth of an American household is $1.06M?

Average Net Worth by Age in the U.S. - NerdWallet

The average net worth for U.S. families is about $1.06 million. The median is $192,700. Net worth typically grows as you age, until you stop working.

www.nerdwallet.com

Of course, the median net worth is $192K..... similarly, average household debt is a meaningless number.

 

[Absentglare]

I want one of these MAGA to explain how they’re so hurt by some trade deficit, but not harmed by higher prices and higher taxes.

 

[soap box]

I have been trying to find out who here has actually been properly studying the issues related to trade and this Google search result is mighty interesting:

View attachment 67564540

I went to that other thread that has a very strange title and found what is very common in so many threads, significant trash language that has an intellectual value that shouldn't be posted here. But there was one attempt, it seemed, at some show of studying the issues at hand.

BUT, you see that image up there of that ice fishing creature? Well, that resulted from my trying to see who in this Community had actually posted the link to that "Foreign Trade Barriers" report:

https://ustr.gov/sites/default/files/files/Press/Reports/2025NTE.pdf

This March 1st report is 397 pages long.

I think I remember the 2024 report was over 400 pages long.

And if memory serves, these reports go back to about the mid-80s.

Still, I am sort of wondering who in this Community has actually read any substantial number of pages of any of those reports; 2024 or 2025?

I get it that the majority of you are simply interested in getting "I Love You!" points from your fellow members and that comes from who can come up with the best trash language, sort of like working at an advertising company; but some of you here must have some other aims for being a participant in discussions here, no?

Maybe the "aim" of learning something?

All you folks honestly believe the complexities of international trade can be summarized in 10 word sentences that contain five beautiful trashy words?

I'm sort of hoping some of you really would like to understand what's going on around this planet, when it comes to trade. So I provide the results of the search I did and why and the link to that report.

By the way, a little bit of 'street level' information with questions:

A bag of rice at the base commissary costs about one half the cost of a bag of rice on the local economy (Japan and the ROK). I wonder why? Rice grown in the U.S. is just about impossible to find, even in a large city in both Japan and the ROK. I wonder why?

Have any of you tried to study anything related to China?

美国贸易代表办公室发布 2025 年国家贸易评估报告

2025 年 3 月 31 日美国贸易代表办公室 (USTR) 向特朗普总统和国会提交了 2025 年国家贸易评估 (NTE)。NTE 是一份年度报告，详细说明了美国出口商面临的对外贸易壁垒以及 USTR 为减少这些壁垒所做的努力。格里尔（Ambassador Greer）表示：“现代历史上没有一位美国总统比特朗普总统更了解美国出口商面临的广泛且有害的对外贸易壁垒。在他的领导下，本届政府正在努力解决这些不公平和不互惠的做法，帮助恢复公平，并让勤劳的美国企业和工人在全球市场上占据首位。”2025 年 NTE 的调查结果强调了特朗普总统的“美国优先”贸易政策和总统的 2025...

www.boringcompliance.com

So I have broken the unwritten rule around here that I am supposed to trash some other human or I get no brownie points, but - - - well, I'll apologize for rowing my little boat in the opposite direction most of you are going. Just wave good bye as I pass you. Oh yes, and please use cool trash language when you go after me. At least I might instill some new trash language in some of your minds. You know, super clever trash stuff. Us old folks should receive special trash language. Something like Mick Jagger might utter.

Could I ask your interest in the Foreign Trade Barriers report?

If your interest is properly studying the issues , I would only suggest that an appeal to authority is always a separate discussion and often endless.

 

[Gatsby]

The national debt per person is $106,000. The average household debt is $105,000.

People have to be very rich to be that poor. Not many Zambian families could rack up $105K in debt.

Some Americans have a lot of money by world standards but I wound't say the median American is doing all that well.

The median American household is in the 92nd-95th percentile of global income. Even a relatively low-income, working-class American household earns more than about 85% of people on the planet.

 

[dncc]

If I may be allowed to display how stupid I am, how does Microsoft "export" services?

If I can't fix my computer and I take it to an authorized Microsoft vendor here in Japan, did Microsoft export the service done to fix the computer?

Or are you referring to some other sort of service not related to individuals? Maybe exporting a "service" to JAXA?

Just curious. Not trying to start any arguing.

Amazon web hosting for example. Your Xrays are probably read by someone offshore. When I used to work in printing, we had proofreaders who were in the Bahamas. All information was transmitted electronically. Those services are not factored into trade deficits.

 

[dncc]

I want one of these MAGA to explain how they’re so hurt by some trade deficit, but not harmed by higher prices and higher taxes.

They are spooked by ignorance.

Here is an example:

Poll: 56 percent of Americans don't want Arabic numerals taught in schools

A recent poll from CivicScience asked Americans whether or not Arabic numerals should be taught in school, revealing what the CEO of the company is calling “the saddest and funniest testament to American bigotry we've ever seen in our data.”

www.fox10phoenix.com

They hear words they don't like and they react with the same ignorance as their leader.

 

[StillBallin75]

The bigger question is, is there anything inherently wrong with having a trade deficit?

The answer is no.

 

[StillBallin75]

If I may be allowed to display how stupid I am, how does Microsoft "export" services?

If I can't fix my computer and I take it to an authorized Microsoft vendor here in Japan, did Microsoft export the service done to fix the computer?

Or are you referring to some other sort of service not related to individuals? Maybe exporting a "service" to JAXA?

Just curious. Not trying to start any arguing.

Something like Microsoft Azure or Microsoft 365, for example. A European company, for example, could very well want to move its IT infrastructure to the cloud, and part of the delivery and maintenance of that infrastructure is done by work and workers located stateside.

This behavior is not officially counted the same way goods are counted as exports when they are physically shipped across borders.

 

[dncc]

The bigger question is, is there anything inherently wrong with having a trade deficit?

The answer is no.

It would be an interesting exercise but if you were to ask people to consider themselves a nation for the purpose of considering the good/bad qualities of a trade deficit...every person on earth (pretty much) would be running a trade deficit.

You bought your pants from Wal*Mart. What did you sell to Wal*Mart?
You bought your car from Mazda. What did you sell to Mazda?
You paid ConEd for your electricity, what did you sell to ConEd?

Yet nobody would think there is a thing wrong with what is, at the end of the day, commerce.