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For decades, trump has been arguing that trade deficits are bad If the president really wants to eliminate the trade deficit, his best option is to rein in the federal budget deficit, which would naturally reduce capital inflows by raising domestic savings. Economist and harvard professor jason furman says no.

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The debate over trade deficits and tariffs is often framed in simplistic, binary terms The president’s frenzied attacks on the nation’s trade deficit show he’s misreading a sign of american economic strength as a weakness Either trade deficits are harmless, or they are disastrous and must be addressed with protectionist.

Key takeaways a trade deficit occurs when a country imports more than it exports

Trade deficits are neither inherently good nor bad Very large deficits can negatively impact the economy. Trade deficits facilitate higher investment than might otherwise occur or mitigate the costs to the private sector of fiscal expansion Thus, they do not necessarily represent weakness, but rather a means for the economy to respond to macroeconomic forces.

President trump has made reducing u.s Trade deficits a priority, but economists disagree over how much they matter and what to do about them. In his paper— “the u.s Myths and realities” — he examines the causes and consequences of the united states’ longstanding trade deficit.

So, trade deficits don’t hurt jobs or growth, aren’t trade or economic scoreboards (especially bilateral ones), and can’t be fixed by things like tariffs or subsidies.

Many of the president’s tariffs rest on the legal claim that the gap between what america imports and exports is a national emergency, an idea that remains contentious. This article delves into the definition and calculation of trade deficits, exploring their advantages and disadvantages, and their impact on employment and economies