A Lesson about Economic Performance and Trade Balances

International Liberty

One year ago, I shared this video to explain why a “trade deficit” doesn’t matter, in large part because it is simply a result of foreigners wanting to invest in America’s economy with some of the dollars they earn.

We also have a trade deficit, I pointed out, because we’re richer than most other nations. Simply stated, we can afford to buy more from people in other nations than they can afford to buy from us.

Indeed, I pointed out that the trade deficit increased in Trump’s first few years in office because better tax policy and better regulatory policy increased America’s economic performance relative to other countries.

This is why, as a general rule, it’s actually a sign of economic strength to have a so-called trade deficit.

The flip side of this observation is that trade deficits will decline if the economy is weak.

And that seems to be…

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