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Saturday, June 9, 2018

Economic security

What Is the Trade Deficit?

It’s not a scorecard, and reducing it won’t necessarily be good for jobs.
A core idea that Donald J. Trump has embraced throughout his time in public life has been that the United States is losing in trade with the rest of the world, and that persistent trade deficits are evidence of this fact.

In this accounting, the $69 billion United States trade deficit with Mexico or $336 billion gap with China is something of a scorecard reflecting diminishing American greatness.

The vast majority of economists view it differently. In this mainstream view, trade deficits are not inherently good or bad. They can be either, depending on circumstances.

As the president’s emphasis on trade deficits puts the United States at odds with allies — in this case at the Group of 7 leaders meeting this weekend in Canada — the trade-offs in making this an overwhelming focus of economic diplomacy are becoming more clear.

Trying to eliminate the trade deficit could mean giving up some of the key levers of power that allow the United States to get its way in international politics. The reasons have to do with the global reserve currency, economic diplomacy and something called the Triffin dilemma.

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