If one wants more equations one might take a look at https://unequalexchange.org/wp-content/uploads/2023/05/The-U... (PDF), Arghiri Emmanuel summarising some of his writings on unequal exchange.
Why does the U.S. always run a trade deficit?
21–30 of 814 posts
Re: Why does the U.S. always run a trade deficit?
#22We have a service based economy. Or a debt service based economy.
Re: Why does the U.S. always run a trade deficit?
#23> The saving gap framework helps clarify what trade policies can and can’t do. For example, a free-trade agreement encourages exports, and an industrial policy can foster a re-shoring of production to replace imports. Such policies influence the size and composition of cross-border trade, but the difference between imports and exports is only affected if these policies also change the gap between domestic saving and…
If iphones were charged with US labor costs then nobody would buy them
Higher end Motorolas were mfg in the US in the early 2000s. It’s possible. Top of the line were ~$700, with inflation that’d afford iPhones. They were top sellers and not niche models.
Re: Why does the U.S. always run a trade deficit?
#24Too much consumption versus production. One component is the ever ballooning government debt. Essentially in 'trade deficit' the thing that is not taken into account is one very big export article of the US. Pieces of paper with 'IOU' written on them. The whole Trump trade war is the completely preposterous thing of spending more in the shop than you can afford and then blaming the shop for taking advantage of you. T…
We don't really know why the US savings rate is low, but we do know more explicitly why the savings rates of those "shops", aka surplus countries is abnormally high, with weak social spending, financial repression, currency manipulation etc. Their manufacturing capacities exceed their domestic consumption to absorb, that is to say, they need export markets to stave off unemployment. Is there not an argument that by t…
US assets far exceed US debts
https://www.federalreserve.gov/releases/z1/20250313/html/rec...
If US private assets were used to "pay off" US government debt (much of which is owed to US private asset holders), then Americans would be about as rich as they were in 2020 (with about $140T instead of today's $170T)
Re: Why does the U.S. always run a trade deficit?
#25[deleted]
Re: Why does the U.S. always run a trade deficit?
#26> The saving gap framework helps clarify what trade policies can and can’t do. For example, a free-trade agreement encourages exports, and an industrial policy can foster a re-shoring of production to replace imports. Such policies influence the size and composition of cross-border trade, but the difference between imports and exports is only affected if these policies also change the gap between domestic saving and…
> why the EU doesn’t consistently run trade deficits.
It’s because, comparatively, the EU doesn’t run as massive fiscal deficits, nor is the EUR the primary reserve currency.
Keep in mind that what the fed article is calling a “saving gap” is really more of a fiscal gap that been plugged by US Treasuries.
Re: Why does the U.S. always run a trade deficit?
#27Getting real physical products in exchange for imaginary numbers and services is a good deal? We sell a lot of software?
Sales of software to a foreign entity count as export.
Re: Why does the U.S. always run a trade deficit?
#28Getting real physical products in exchange for imaginary numbers and services is a good deal? We sell a lot of software?
It seems great until those imaginary numbers become worthless overnight. Then you might have a bit of an "oh shit" moment as you realize that the industrial ecosystem required to substitute those imports would take a decade and a half to build even if your money were worth something, which it now isnt. Lots of countries collapse due to overreliance on foreign imports. Argentina never recovered from its peak in the 19…
Why would they become worthless? The entire world is forever beholden to Microsoft Windows, Office, AWS, X, iOS, Google Play, whether people like it or not. People have made free or cheaper or local or better alternatives and they have never succeeded at dethroning these
Re: Why does the U.S. always run a trade deficit?
#29> The saving gap framework helps clarify what trade policies can and can’t do. For example, a free-trade agreement encourages exports, and an industrial policy can foster a re-shoring of production to replace imports. Such policies influence the size and composition of cross-border trade, but the difference between imports and exports is only affected if these policies also change the gap between domestic saving and…
> why the EU doesn’t consistently run trade deficits. It’s because, comparatively, the EU doesn’t run as massive fiscal deficits, nor is the EUR the primary reserve currency. Keep in mind that what the fed article is calling a “saving gap” is really more of a fiscal gap that been plugged by US Treasuries.
> Keep in mind that what the fed article is calling a “saving gap” is really more of a fiscal gap that been plugged by US Treasuries.
They're two sides of the same coin, but the levers of control and causality aren't symmetric.
In particular, the US government doesn't have direct control over the savings behaviour of anybody, especially not of people outside the US.
That's why most policies that aim to reduce the US government deficit are bound to either fail or have undesirable negative effect elsewhere.
Re: Why does the U.S. always run a trade deficit?
#30> The saving gap framework helps clarify what trade policies can and can’t do. For example, a free-trade agreement encourages exports, and an industrial policy can foster a re-shoring of production to replace imports. Such policies influence the size and composition of cross-border trade, but the difference between imports and exports is only affected if these policies also change the gap between domestic saving and…
> why the EU doesn’t consistently run trade deficits. It’s because, comparatively, the EU doesn’t run as massive fiscal deficits, nor is the EUR the primary reserve currency. Keep in mind that what the fed article is calling a “saving gap” is really more of a fiscal gap that been plugged by US Treasuries.
More precisely it’s because the EU has no fiscal unified fiscal policy. Every member is a currency user of a foreign currency it must acquire from the ECB.
Wynne Godley explained this all nicely in Maastricht and All That.