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Why does the U.S. always run a trade deficit?

libertystreeteconomics.newyorkfed.org

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Re: Why does the U.S. always run a trade deficit?

#91

Post by sorcerer-mar »

tiahura wrote: post #83
CyanLite2 wrote: post #71

Because the USA has more money than other countries. People outside the US can't afford to buy our products, but we can afford to buy theirs. This is ideal for many people in the US who want cheap $200 flat screen TVs in every room of their house. This isn't good for unskilled labor in rural parts of America, often in swing states. Manufacturing had always been a place for high school grads to have a decent career. T…

The decimation of the price of unskilled labor via free trade was one of the all time Panglossian failures to consider second and third order effects.

Manufacturing was “crumbling” in the US decades prior to anything that people today refer to as "free trade."

Re: Why does the U.S. always run a trade deficit?

#92

Post by sorcerer-mar »

leoqa wrote: post #65
a2128 wrote: post #28

Earlier quoted context omitted.

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

I don’t think they’re as beholden as you think. If those companies went down, a balkanization of tech would probably emerge, with regional preferences. Probably would spur innovation and consumers would quickly adapt.

For sure! All you gotta do is the thing every developing economy on the planet has been attempting and failing to do which is escape the middle income trap.

The US is unique in its vision to step backwards into the middle income trap amongst the rest of 'em.

Re: Why does the U.S. always run a trade deficit?

#93

Post by Attrecomet »

hunglee2 wrote: post #45
Symmetry wrote: post #40

Earlier quoted context omitted.

The US dollar was the global reserve currency in the 1960s but the US was running a trade surplus then.

Nixon broke Bretton Woods by coming off the gold standard, leading to massive expansion of the money supply. Lyn Alden has good analysis of this process https://www.lynalden.com/fraying-petrodollar-system/

Imagine having to tell the economy it can only grow as fast as a specific rare metal is mined for money to continue to make sense. The gold standard was a system breaking up by its inherent contradictions, as another poster has phrased it, when Nixon went off it.

Re: Why does the U.S. always run a trade deficit?

#94

Post by ljosifov »

Because there are 1) willing exporters of US dollars USD (the US federal government USG ultimately, and US citizens in the final analysis); and 2) willing users of USD - us non-US-ian people around the world.

When I sell stuff to someone in the UK, then pounds are fine as means of exchange. When I sell the same someone around the world, then the transaction not being domestic, the cash part that is 1/2 of it (or 1/4 if you want to look at it in a way of transaction = quartet of {stuff,cash,buyer,seller}) and it can be in any currency of any country. It helps if it is the country of the buyer or the seller, but in general it is neither.

I prefer US Dollar to Zongoan Vonga, b/c:

1) USG typically does not devalue their USD much, I don't have to rush to exchange the USD for something else. Or if you want - most others devalue theirs more.

2) USG has not deleted and re-issued their USD even once so far afaik. Other countries do it more often.

3) Everyone else uses USD already. It's easier if it's one currency sufficing for all trade.

4) Often I don't produce oil, and oil is easiest to pay by with USD. Not impossible with others, just more difficult.

5) US banks allow me to hold USD in accounts outside of US. They don't ban me to take the USD in- or out- of US.

6) With USD in hand I can buy lots of stuff US produces, plus I can buy US assets - property, financial assets etc. US does not discriminate against me johnny-the-foreigner much, they are mostly relaxed in that respect. Other countries have all manner of rules that amount to: they'll basically steal their currency off you, or make it worthless to you by making you unable to claim the goods & services that are nominally sold in that currency.

Before people pipe in how US is terrible in this and that - above is all *relative* to all other options all other currencies available. This is from to top of my head, I'm sure I made some error and there is more.

Re: Why does the U.S. always run a trade deficit?

#95

Post by Brybry »

conception wrote: post #31
corimaith wrote: post #15

Earlier quoted context omitted.

iPhones are already heavily overpiced considering how other companies regularly release phones with similar specs at lower prices.

Let’s be honest, no one is releasing phone with “similar” specs… https://browser.geekbench.com/mobile-benchmarks Functionality sure maybe but competitors are not hot on apples heels or anything.

Being honest, Geekbench 6 Single/Multi results vary depending on source and can be picked to fit different narratives.

                     S      M 
  iPhone 16 Pro Max 3331   8106  
  Samsung S25 Ultra 3137   9769  [1]
  
  A18 Pro           3582   9089  
  Snapdragon 8-E    3155   9723  [2]
  
  A18 Pro           3452   8572  [parent link]  
  S25 Ultra         missing      [parent link]  
  SM-S938U          2k-3k  9k+   [3]
[1] https://www.phonearena.com/phones/benchmarks/performance

[2] https://nanoreview.net/en/soc-list/rating

[3] https://browser.geekbench.com/search?utf8=%E2%9C%93&q=samsun...

[4] https://browser.geekbench.com/search?utf8=%E2%9C%93&q=Apple+...

Re: Why does the U.S. always run a trade deficit?

#96

Post by neximo64 »

c-linkage wrote: post #86

I've always disliked economics because it never seems to make much sense. The first equation in the article -- the basis on which the entire premise rests -- just feels wrong. > Spending is either on the consumption of goods and services or investment spending on equipment, structures, and intellectual property products. Income is allocated to either consumption or to saving by households, businesses, and government.…

So what's negative savings in this model? Money you get temporarily and use to increase income?

Re: Why does the U.S. always run a trade deficit?

#97

Post by tzs »

tonyhart7 wrote: post #79
ta1243 wrote: post #10

Earlier quoted context omitted.

If iphones were charged with US labor costs then nobody would buy them

"If iphones were charged with US labor costs then nobody would buy them" idk, people pay premium for avocado sandwich a lof of cali folks certainly would do that

For most people who aren't very wealthy there is a huge difference between something making their $10 sandwich become a $20 sandwich and something making their $1000 phone become a $2000 phone.

Also, people are generally more flexible with sandwiches. If the $10 sandwich I have once a week goes to $20 I might respond be switching to having that sandwich every other week and get something else on the alternate weeks.

That won't work for a phone because I generally replace my phones when the old phone is no longer adequate.

Re: Why does the U.S. always run a trade deficit?

#98

Post by massysett »

“deficits are also due to a persistent shortfall in domestic saving that requires funds from abroad to finance domestic investment spending.”

But why isn’t it: deficits are due to a persistent surplus in funds from abroad to finance domestic investment, perhaps because the economy produces high returns and welcomes foreign investment?

Re: Why does the U.S. always run a trade deficit?

#99

Post by hollerith »

ta1243 wrote: post #64
rayiner wrote: post #14

Earlier quoted context omitted.

Or we would have automated assembly faster—the investment in which would’ve been counted in domestic investment offsetting the trade deficit, right? I’m trying to verify my mental model of what’s going on.

OK lets assume the entire chain is automated and you don't need to employ anyone. The factory can go anywhere, in China, in France, in California, in North Dakota. What benefit is that to the average American citizen?

The US government can tax the factory and spend the tax revenue on average Americans. The German government for example gets a big fraction of its revenue from taxes on export industries that employ only a small fraction of Germans.

Re: Why does the U.S. always run a trade deficit?

#100

Post by branko_d »

chii wrote: post #33
rayiner wrote: post #14

Earlier quoted context omitted.

Or we would have automated assembly faster—the investment in which would’ve been counted in domestic investment offsetting the trade deficit, right? I’m trying to verify my mental model of what’s going on.

the assumption being that the automated assembly is going to be price competitive with the manual assembly. If this is the case, why doesn't it happen with the chinese supply chain? After all, there's no reason not to make it cheaper. The only conclusion you can draw is that the automated assembly will still be more expensive compared to the current manual one.

> why doesn't it happen with the chinese supply chain

There are already "dark factories" that don't require light or heating because they are fully automated and don't require human presence.

Guess where they are? China.

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