Why does the U.S. always run a trade deficit? • Hacker News Board

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

#411

Post by AnIrishDuck » Wed, May 21, 2025, 2:47 AM UTC

chabska wrote: post #389

starspangled wrote: post #369

Earlier quoted context omitted.

> It gets massive amounts of products and services enabling the US residents live well beyond their means. What does this mean really? That is their means. For a somewhat topical example, people of Australia get access to cheap medications (in part because they pay to subsidize the cost of them but also because) their government negotiates with pharmaceutical corporations to pay lower prices. This kind of negotiation…

> US manufacturing output is double that of China's on a per-capita basis. Only on a dollar value basis. And that's heavily skewed on how an item's value is calculated. When you use $50 of parts (all made in China) to assemble a machine that you sold at $500 , $50 of GDP value is attributed to China while $450 of GDP value is attributed to the US. But who did more "manufacturing"?

What other system of value are you using here? Bottle caps? Nostalgia?

While the dollar remains the global reserve currency, this is just a wild theory of trade. If the $450 of value was so easy to extract, why wouldn't China simply assemble it in their own country and take the whole pie?

(they clearly already do this everywhere they can)

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

#412

Post by tastyfreeze » Wed, May 21, 2025, 2:50 AM UTC

analog31 wrote: post #405

tastyfreeze wrote: post #388

Earlier quoted context omitted.

If only there was some material that didn't degrade over time and is hard to produce. Somebody should invent something like that.

Its value goes up and down, and is as speculative as anything else.

Price does not equal value. One oz today will buy you about the same as 1 oz 100 years ago.

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

#413

Post by coliveira » Wed, May 21, 2025, 2:56 AM UTC

starspangled wrote: post #398

chabska wrote: post #389

Earlier quoted context omitted.

> US manufacturing output is double that of China's on a per-capita basis. Only on a dollar value basis. And that's heavily skewed on how an item's value is calculated. When you use $50 of parts (all made in China) to assemble a machine that you sold at $500 , $50 of GDP value is attributed to China while $450 of GDP value is attributed to the US. But who did more "manufacturing"?

> Only on a dollar value basis. Uh, yes. > And that's heavily skewed on how an item's value is calculated. An item's value is calculated according to what it is bought and sold for. That's how value is determined. What would you rather it "skew" towards? > When you use $50 of parts (all made in China) to assemble a machine that you sold at $500 , $50 of GDP value is attributed to China while $450 of GDP value is attr…

> then clearly that company created an enormous amount of value

No, it is more like these companies monopolized access to the high income market and exploited this inefficiency. It is similar to buying a stock for $10 then increasing the bid ask spread to sell it for $100.

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

#414

Post by AnIrishDuck » Wed, May 21, 2025, 2:59 AM UTC

hahajk wrote: post #394

JackYoustra wrote: post #378

Earlier quoted context omitted.

> running a deficit in physical goods traded This is not a disadvantage. By your own admission: we send dollars overseas in exchange for goods. We never have to actually send goods of our own. We effectively get them for the price of printing dollars, so effectively free.

some one really need to explain this in a way I understand, because this sounds very much like "free lunch". Matt Levine explained it as exporting debt ("The US is better than anyone at manufacturing financial instruments"). He also said we get computers in return for entries in a database. This sounds... untenable? too good to be true? a shakey foundation on which to build an economy?

The entries in a database are IOUs. The US will have to return something at some point, but as we have complete control over our own currency, the terms of the deal are... very flexible on our side.

It's effectively a bet on China's part that (1) it's worth it to build their own industrial base and (2) the US won't renege, at least severely, because of the consequences.

Worth noting that the current proposals to further blow up the deficit may actually accelerate this dynamic, regardless of tariffs, because somebody has to buy these IOUs.

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

#415

Post by coliveira » Wed, May 21, 2025, 2:59 AM UTC

alephnerd wrote: post #318

EasyMark wrote: post #313

Earlier quoted context omitted.

I see this tossed around but no one ever seems to point out that EU has similar numbers, which are about half, but still extremely higher than global average; and much more so in the richer countries of the EU (per capita of course)

The EU complains about China Shock equally as much as the US [0][1][2][3][4][5][6] Just becuase Trump burnt bridges with the EU doesn't mean that EU member states will gladly allow job losses across Europe's industrial heartland to a country that is supplying a direct competitor (Russia) that has conducted grey zone warfare within the EU The EU and it's member states are all working on building domestic capacity, and…

What about the EU stopping its own subsidies first, before asking this from other countries?

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

#416

Post by xk_id » Wed, May 21, 2025, 3:03 AM UTC

greenavocado wrote: post #403

mrtksn wrote: post #115

Earlier quoted context omitted.

US doesn't just get political influence. It gets massive amounts of products and services enabling the US residents live well beyond their means. China for example, sends huge number of electronics and all kind of other consumer goods that Chinese produce by sweating in 12 hours shifts in 6 day work weeks in exchange for imaginary numbers. US is definitely not the victim here. There's the risk of this system stop wor…

The mental gymnastics here to justify the dollar's reserve status and trade deficits as some kind of genius economic strategy are incredible. First off, this ridiculous notion that the US "gets products and services enabling residents to live beyond their means" is classic ivory tower cope. Yeah, tell that to the average American worker whose real wages have been stagnant for DECADES while housing, healthcare, and ed…

> The deindustrialization of America was the greatest wealth transfer from working people to corporate elites in history, dressed up as "free trade."

You make it sound like this was a conspiracy, and perhaps it did devolve into that eventually, but this system was introduced at the time in order to deal with the stagflationary crisis of the 70s. Only because things had gotten so bad, did Reagan and Thatcher manage to get the democratic support for making the transition.

Very emotional post.

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

#417

Post by coliveira » Wed, May 21, 2025, 3:07 AM UTC

alephnerd wrote: post #292

mitthrowaway2 wrote: post #289

Earlier quoted context omitted.

... Yes. Although, you've phrased that like it's in some way a rebuttal to what I wrote, when it's actually consistent with what I said.

Because your point is that the wage gap between the US and Chinese household would close significantly - yet it does not. Even with those multipliers, the wage gap between your median Thai and Malaysian household and your median Chinese household is significant, let alone with an American household. The wage gap cannot be solved until there is a serious expansion in China's social safety net if China wishes to contin…

It must be sad to have this kind of beliefs and still see median salaries and consumption growing all across China for the last 20 years.

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

#418

Post by skybrian » Wed, May 21, 2025, 3:08 AM UTC

hunglee2 wrote: post #35

Using a national currency as the de facto global reserve guarantees a trade deficit for that country. No one else can manufacture USD's, so other countries have to acquire them by shaping their economies to supply goods and services demanded by the US. They can then use these earned dollars to transact with other countries, as the US itself insists they do. For the US, this is a simple trade off - gain massive politi…

Rather than thinking of it as demand for dollars, you could think of it as demand for US investments in general. The US is one of the better places in the world to invest. Why foreigners want to buy US tech stocks (for example) shouldn’t be a mystery.

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

#419

Post by SoftTalker » Wed, May 21, 2025, 3:12 AM UTC

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.…

It isn't called "the dismal science" for nothing.

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

#420

Post by coliveira » Wed, May 21, 2025, 3:12 AM UTC

overfeed wrote: post #296

s1artibartfast wrote: post #224

Earlier quoted context omitted.

>There's the risk of this system stop working and that's when the US might have hard times due to being forced to live by its means and have no ability to kickstart its own production when that time comes. I think the risk is greater than that. A concern is not just a regression to the mean, but indebtedness and the future having to pay up for the spending of the past. I think a different analogy would be a joint cre…

> but indebtedness and the future having to pay up for the spending of the past The debt is denominated USD, the US mint could hypothetically print a trillion dollar note and settle the debts. Doing so would wreck trust in the existing system - so it's not just about the debt, but people tend to gloss over how much control the US has over the debt, so the indebtedness (in USD) is a relatively small factor overall.

Do you understand what $100T printed overnight would cause to the economy? The price of everything starting from assets would skyrocket and in a few months we could be living in hyper inflation.