Why Do We Have A Trade Deficit?

[medi]

That's a fair question and not stupid at all.

When I talk about services from companies like Microsoft being "exported," I’m not referring to individual tech support or local repair services. I’m talking about digital services and licensing. The kind of revenue that stems from software, cloud infrastructure, advertising platforms, and data services. These digital service exports are “misclassified” in trade balances and are instead classified as US consumption even if the customer is in Europe, Canada or Japan.

If digital services were properly counted as exports, the US trade balance, especially with the EU would look quite different. The US would even show a surplus.

Hope that clears it up!

Your feedback/response is very much appreciated and I noticed that a few other posts were indicating that digital services were not properly counted as whatever - - - please excuse that use of the vocabulary "whatever" that I am using so I can draw in some other posts by others in this thread.

To get to the point, after I did some studying of the 2025 report I offfered earlier in this thread I found that they do include information about digital services and let me offer a copy of two paragraphs:

The heading "Services Barriers" starts on page 73.

But I wish to copy here from page 77, two paragraphs for us to give consideration to for discussion along this same path of services provided that it seems are (or could be) providing some benefit to U.S. companies.

Cloud Computing Services

Especially troubling is China’s treatment of foreign companies seeking to participate in the development of cloud computing services, including computer data processing and storage services and software application services provided over the Internet. China prohibits foreign companies established in China from directly providing any of these services. Given the difficulty in providing these services on a cross- border basis (largely due to restrictive Chinese policies), the only option that a foreign company has to access the China market is to establish a contractual partnership with a Chinese company, which is the holder of the necessary Internet data center license, and turn over its valuable technology, IP, know-how, and branding as part of this arrangement. While the foreign service supplier earns a licensing fee from the arrangement, it has no direct relationship with customers in China and no ability to independently develop its business. It has essentially handed over its business to a Chinese company that may well become a global competitor. This treatment has generated serious concerns in the United States and among other WTO Members as well as U.S. and other foreign companies.

In major markets, including China, cloud computing services are typically offered through commercial presence in one of two ways. They are offered as an integrated service in which the owner and operator of a telecommunication network also offers computing services, including data storage and processing function, over that network, or they are offered as a stand-alone computer service, with connectivity to the computing service site provided separately by a telecommunications service supplier. Although China’s commitments under the WTO General Agreement on Trade in Services (GATS) include services relevant to both of these approaches, neither one is currently open to foreign-invested companies in China.

And that is only China for now, but it doesn't seem like a bad jumping off point to emphasize that some of you might be wrong about some of these services not being taken into consideration when the government compiles the many different numbers for this-and-that and that-and-this.

I got the impression from a few of you folks that there was no data on some of these topics that have been brought up; but there is data. I'm not making this stuff up. It's coming straight from the latest report. And there are earlier reports from 2024 and there are reports from before that.

I suppose I am confused why y'all didn't know the information was, in fact, available?

 

[PeacefulWarrior]

What about the 67 million on welfare, most are not working and probably not even looking for work. Yes, 4.2% is ok, but this number is not real if you don't count those who have not returned to work.

What kind of "welfare"? Food stamps? Medicaid?

Many of those people are already working, its just that Big Corp doesn't pay them enough to bump them over the poverty limit.

Its not the poor that are screwing us.

 

[soap box]

I've had to take some time to give respectful consideration to your question. The reason time was needed was because I am simply having a hard time pinning down where that "appeal to authority" fits into the gathering of information; which in the long of it means I don't understand what authority you are referring to.

BUT that 397 page report is, to my mind, full of very useful information.

I had to add more time to considering your phrase "properly studying the issues" because one imortant aspect of a "proper study" is to be sure you have as many facts as is possible and that 397 page 2025 report must contain a lot of facts, as would also the 2024 report.

A short time ago, after spending time thinking about what I made note of above, it hit me that you could provide me with links to the sources you use for gathering information. It seems a fair request from me, as I initiated the providing of documentation AND I am spending a respectful amount of time thinking about your post and am spending time posting here in response to you.

Note before answering - I checked page 397, but the pagination on the document you linked stops at 377, although the appendices are interesting. I read/skimmed the part on Guatemala. Also the document is from the current administration.

To the point -
Two items. Wood from Canada and bananas from Guatemala. We can't replace the Canadian wood because it grows too slow, and the bananas people like in Grandma's recipes don't grow here at all.


Everything I read in that report might be completely true. But should the tariffs on Guatemala, or Vietnam, or Canada be imposed on all its exports or only ones that have been properly studied?


Wouldn't it make sense if tariffs were very specifically targeted to an exact industry? Shouldn't a tariff be considered carefully? But has trump considered anything carefully?

Here's the point: Trump can impose tariffs but it's nonsensical to impose tariffs on the entirety of a country's exports. For everything mentioned in the document, a tariff could be considered. But a blanket tariff on all exports is foolish because we need the wood.

 

[soap box]

I've had to take some time to give respectful consideration to your question. The reason time was needed was because I am simply having a hard time pinning down where that "appeal to authority" fits into the gathering of information; which in the long of it means I don't understand what authority you are referring to.

BUT that 397 page report is, to my mind, full of very useful information.

I had to add more time to considering your phrase "properly studying the issues" because one imortant aspect of a "proper study" is to be sure you have as many facts as is possible and that 397 page 2025 report must contain a lot of facts, as would also the 2024 report.

A short time ago, after spending time thinking about what I made note of above, it hit me uue administration hasthat you could provide me with links to the sources you use for gathering information. It seems a fair request from me, as I initiated the providing of documentation AND I am spending a respectful amount of time thinking about your post and am spending time posting here in response to you.

I forgot a link, but I would link to the same document you did, and ask another question, since the administration can propose a rationale for tariffs in specific claims, why do they choose a blanket tariff on the entire country?

 

[Allan]

The poll should have allowed for multiple choice as there's more than one reason.

 

[Raven484]

What kind of "welfare"? Food stamps? Medicaid?

Many of those people are already working, its just that Big Corp doesn't pay them enough to bump them over the poverty limit.

Its not the poor that are screwing us.

All of them.
This is an interesting article:

White House report: Most welfare recipients able to hold jobs, but aren't - UPI.com

A White House report said Thursday most Americans living in poverty who receive government welfare benefits are not working, even though they are able to.

www.upi.com

If this is correct, there are at least 20-25 million collecting welfare benefits that are not working and are not disabled. If not higher.
You are right though; Big Corp is the problem for the others that do work and collect. They can do this because we do not have enough jobs here. They also threaten to move their companies outside the US.
If we did have a more fair-trade policies, companies would be forced around the world to have better wages.
The people who are not working should be forced back into the workforce if they want Medicaid or SNAP. We keep saying who is going to do the job of illegal immigrants, start there, we only have about 30 million people to fill the roles.
Welfare will still be needed, but it needs to be given to those who deserve it. Seniors, disabled citizens and immigrants with disabilities, working citizens and legal immigrants under the poverty level until wages are better.

 

[devildavid]

We can’t forget to factor in the Trump victimhood grievance quotient. It is a special figure pulled from Trump’s ass.

 

[Juks]

Are you sure this is correct? I've worked in a high tech, s/w intensive industry and I didn't think this was how it worked, although I am not certain about that. Hence my question. My thought is that once the related money crosses an international border, it is an import/export. Hence the EU imports a lot of digital services and products from US companies like Microsoft etc. In the repairs case previously mentioned a portion of the repair would effectively be an import due to the licensing etc paid by the local service agent to Microsoft in the US. For the original s/w installation that would be 100% an import of the S/W component.

In a similar way, an American tourist visiting the EU is actually an export from the EU to America. That is because the tourist is paying for EU services (hotels, food etc) with US $'s. I know that some (all?) countries do indeed recognise foreign tourism as an export industry.

When a European business pays Microsoft for cloud services, Office licenses, or data analytics, it’s billed through a European subsidiary (like Microsoft Ireland). Those profits are often reported as domestic earnings from a foreign affiliate, not as export revenue. They show up in the income account (primary income from foreign affiliates), not in the trade balance as service exports.

Both the EU and the US follow international guidelines from the IMF. These guidelines allow income from foreign subsidiaries to be recorded not as exports, but as primary income from direct investments. This system was designed for an industrial economy, not for digital services with minimal physical presence. The US companies takes advantage of this rule by invoicing through, for example, Microsoft Ireland, the transaction is not recorded as a US export but as a “domestic sale” in Ireland, with profits later repatriated to the US.

 

[Juks]

Your feedback/response is very much appreciated and I noticed that a few other posts were indicating that digital services were not properly counted as whatever - - - please excuse that use of the vocabulary "whatever" that I am using so I can draw in some other posts by others in this thread.

To get to the point, after I did some studying of the 2025 report I offfered earlier in this thread I found that they do include information about digital services and let me offer a copy of two paragraphs:

The heading "Services Barriers" starts on page 73.

But I wish to copy here from page 77, two paragraphs for us to give consideration to for discussion along this same path of services provided that it seems are (or could be) providing some benefit to U.S. companies.

Cloud Computing Services


And that is only China for now, but it doesn't seem like a bad jumping off point to emphasize that some of you might be wrong about some of these services not being taken into consideration when the government compiles the many different numbers for this-and-that and that-and-this.

I got the impression from a few of you folks that there was no data on some of these topics that have been brought up; but there is data. I'm not making this stuff up. It's coming straight from the latest report. And there are earlier reports from 2024 and there are reports from before that.

I suppose I am confused why y'all didn't know the information was, in fact, available?

I haven’t said that there’s no information about digital services, but rather that these services are not recorded as exports in the US trade balance, even though they are consumed abroad. It’s a matter of classification, not data availability.