ABC NEWS: The gaping US trade gap: A sign of weakness? Not necessarily




November 10, 2017 | By: PAUL WISEMAN   –   

President Donald Trump ripped into one of his favorite targets Thursday in Beijing: The United States’ “shockingly” large trade deficit with China.

“I blame past administrations,” Trump declared, “for allowing this out-of-control deficit to take place and grow.”

America’s lopsided trade relationship with China and with the rest of the world is a familiar theme for Trump and his economic team. They’ve branded trade deficits a mark of economic weakness — even shame — that depress growth and kill jobs.

Yet most economists say their ire is misplaced. They reject the notion that trade is a zero-sum game in which victory goes to the countries that run a trade surplus by exporting more than they import.

“Focusing on the trade deficit as a sign of weakness is fundamentally flawed,” says Bryan Riley, a trade analyst at the conservative Heritage Foundation. “If you look over history, there is no correlation between trade deficits and weak economy.”

In fact, a swollen trade gap — which shows how much the value of imports exceeds the value of exports — can reflect economic might: When times are good, after all, consumers feel more prosperous and confident enough to spend freely — on imported goods as well as on home-grown goods.


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