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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?

#641

Post by jerkstate »

sorcerer-mar wrote: post #397
jerkstate wrote: post #263

Earlier quoted context omitted.

That’s what the data shows until you peel back the covers and understand that nothing at all could be manufactured here at all without enormous imports of not just raw materials but partially completed goods. US manufacturing output looks large economically because it’s mostly final assembly of imported partially completed goods, but if you looked at the value added (manufacturing output minus imports) it would be mu…

Outside of a few strategic industries or products, why is this bad?

I’m going to offer a less defense-oriented point of view: manufacturing jobs are more lucrative than service jobs that are available to uneducated people, and allow them to live a more prosperous, happy life. More of these jobs is a net benefit for society.

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

#642

Post by OGWhales »

mrtksn wrote: post #526
starspangled wrote: post #517

Earlier quoted context omitted.

Many countries control their currency and can print money to pay debts, and can control their fiscal and monetary policies to best gain advantage for themselves. And they do. US can do some things more, bigger, longer, etc., for various reasons. Just like Australia can do more, bigger, longer, etc., than Tonga. I don't really see anything profound being said here. USA might be in some advantageous position now, and i…

The reserve currency status makes all the difference on how much of all this you can do and under what conditions. That's the difference and that's why US had it so good for so long and now is due for such a large correction. Also, US is blessed with huge natural reserves, didn't actually waste it all on drugs and alcohol but did in fact created some of the best institutions in many areas so maybe it wouldn't be that…

Is the USD due for a correction? I would agree the current policies do not help, however I have a hard time seeing any other currency actually replacing the dollar as the world's reserve currency.

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

#643

Post by mrtksn »

IG_Semmelweiss wrote: post #634
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…

Your statement would be true without nuance. Yes. The mass of US consumers do benefit from penny subsidies of certain foreign product. However, for every penny of foreign subsidy benefitting US consumers buying finished iron or steel goods, a US metallurgist is losing a job somewhere. On strictly numbers, we are better off with foreing-paid subsidies yes, but there are losers, and they take the brunt of the downside.…

Good point but I think these are about the choices you make.

You can choose to look after your metallurgist who become obsolete as a laborers but I'm sure they are amazing people. You might be worried for becoming communist or welfare state though.

You can choose to limit trade and other freedoms so you can artificially keep metallurgists at work so you don't have to share what you have with them without exchanging something. This can help you can feel good about not giving away freebies and pretend that this is a meritocracy but suffer from slow progress and other conflicts related in preserving these artificial limits.

You can just choose to leave them to suffer as long as their numbers are not enough to bother you. This one gives you the good life until suddenly it stops doing that if the numbers go up enough.

I guess in this case it was to ignore the "losers" in the system until they become numerous enough to tear down the whole system. A lot of people who vote for obvious frauds and outright fascists(I'm not talking about USA, but in general) are just anti-establishment who don't mean bad but just want to see the current order teared apart at any price.

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

#644

Post by skybrian »

deadfoxygrandpa wrote: post #428
skybrian wrote: post #418

Earlier quoted context omitted.

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.

but it is a demand for dollars. if germany buys oil from saudi arabia and they have to use USD to buy the oil, that right there is a demand for us dollars and not us investments in general

Ultimately those dollars will be either spent or invested.

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

#645

Post by avidphantasm »

OGWhales wrote: post #638
zaphar wrote: post #627

Earlier quoted context omitted.

as long as we keep inflation in check That's the trick though isn't it? MMT discourse tends to gloss over or ignore the dangers of runaway inflation and act as if you can borrow all you want with no consequence. But that part that you put in parentheses above is precisely why you can't do that. What you borrow for your budget has to be payed back later. If you just print money to do it because you borrowed more than…

> MMT discourse tends to gloss over or ignore the dangers of runaway inflation and act as if you can borrow all you want with no consequence. I see people say this a lot, which is odd since as far as I have seen it's one of the main points MMT people make. I'm not sure how one of the core insights of MMT has become the main criticism of it, it's kind of funny. I suppose this is because some people have taken MMT to m…

Exactly. The power of MMT is that it credibly explains what taxes actually are (not a source of government funding, but control rods for inflation and a constant source of domestic demand for the currency that helps maintain monetary sovereignty) and how to make sure spending is productive and not inflationary (e.g. through the currency issuer being the employer of last resort, etc.). You might not like it, but if you want to have a vaguely capitalistic system that has long term stability, you need to employ mechanisms like this.

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

#646

Post by amluto »

davedx wrote: post #551
amluto wrote: post #197

Earlier quoted context omitted.

In fact, according to US government published numbers, the US runs a goods+services surplus with quite a few countries. FWIW, I’m not sure I believe the official numbers, or at least I don’t believe that they measure anything useful. When a French customer buys an AMD CPU or Nvidia GPU that was made in Taiwan, the physical object may never touch US soil, but a lot of money flows in. Did we export a good, a service, o…

You have to start somewhere though. The alternative, throwing your hands up and saying "this is too complex to track", isn't useful either

Like this?

https://www.bea.gov/news/2025/us-international-trade-goods-a...

Of course, if you take these numbers and throw them into the USTR’s ridiculous “reciprocal” formula, you don’t even end up agreeing with the sign of the tariffs proposed for a lot of countries.

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

#647

Post by jajko »

jongjong wrote: post #134

My take is that the US likes to export US dollars... Then wealthy foreigners don't know what to do with them, so they pour them into the NASDAQ and NYSE and fill the pockets of US executives. The US can also leverage its powerful military to coerce artificial demand for USD within foreign nations to prevent it from being redeemed for US labor. Like how the US coerced Australia into a ridiculously expensive AUKUS deal…

Its not what we is trying to do (at least in official carefully formulated and team-vetted PR statements), but how he is doing it. None of his official big claims were ever realized - wall in Mexico anybody? End of Ukraine war in 24h instead of continuous asslicking of puttin'?

Wanting to improve something and then doing active steps towards damage and destruction because he is a) brainwashed in 80s in Moscow aka russian agent Krasnov; b) arrogant corrupt fool doing insider shorts all the time and taking bribes officially left and right; c) as mentioned above Dunning-Kruger effect example par excellence in the wild.

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

#648

Post by sorcerer-mar »

int_19h wrote: post #578
ijk wrote: post #350

Earlier quoted context omitted.

Which was part of the rationale for supporting Ukraine: the best way to build up a manufacturing base is if you have customers, and so supplying munitions to Ukraine was a win/win/win from the military's point of view: Ukraine gets ammo, the US gets to ramp up domestic military production with, effectively, someone else paying the bill. (Granted, some of that was US funds, so the 'someone else' was often another part…

Note that Ukraine is using somewhere around 5k shells per day , and that's only because they have to ration it due to insufficient amounts. For another comparison, Russia is making 250k shells every month, and using 10-15k every day. At peak levels of artillery use in late 2023, when both sides still had ample stockpiles, the combined total was ~40k shells per day. So, yeah, it's good that we're ramping it up, but al…

How many aircraft was the US producing in 1940? What about 1945?

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

#649

Post by seanhunter »

The whole idea of balanced trade makes no sense at all.

Take New Zealand as an example. Last year the major import from NZ to the US was wine.

The major export from US to NZ was military hardware.

Now. Why should the dollar quantity of wine you buy from someone equal the dollar quantity of military hardware you sell them?

There really is no reason at all that the bilateral trade between countries should be balanced and therefore it's not reasonable to think that the aggregate trade with all countries should be balanced or that it would be more desirable if that were the case.

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

#650

Post by coliveira »

alephnerd wrote: post #430
coliveira wrote: post #417

Earlier quoted context omitted.

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.

Nothing which I said detracts from that. China has been one of the most significant economic growth stories in modern history, but the policies used to grow from 1980-2019 are differnet from those that China needs from 2020-2060 China is now in the same developmental band as Thailand, Malaysia, Mexico, Brazil, etc. And if China does not wish to get stuck in the middle income trap, holistic growth across all income st…

That's just another strain of the doomsday economics that has been applied to China at least since 2005. Yet, the Chinese economy and its government have proven to be able to overcome all these supposed huge obstacles that would stop the Chinese growth at any moment... So I urge you to rethink your theories based on reality of what the Chinese people are capable of doing.
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