What Is A Trade Deficit? And Why Does It Matter?

NPR

Published June 11, 2018 at 12:33 PM CDT

One possible outcome of the Trump-Kim summit could be changes to the looming trade war with China. President Trump has long railed against the U.S. trade deficit with China.

Here & Now‘s Jeremy Hobson speaks with CBS News’ Jill Schlesinger (@jillonmoney), host of “Jill on Money” and the podcast “Better Off,” about what a trade deficit is, and what it means for the U.S.

Trade Deficits, Explained

“This is just a measure of imports versus exports,” Schlesinger says. “So, let’s look at 2017. The U.S. imported $2.9 trillion worth of goods and services. It exported $2.3 trillion or so. It amounted to a trade deficit of $566 billion in goods and services.”

Is A Trade Deficit Always Bad?

“I know that there’s a lot of confusion around this. Wilbur Ross, who’s the commerce secretary, said that trade deficits ‘weaken our economy.’ Those are the exact words he used. And that economists that I speak to, they say, ‘Look, that’s just not the case. Imports really don’t have an effect on GDP, either positive or negative.” And they push back on the Trump administration’s emphasis that trade deficits mean that, you know, the U.S. loses and surpluses mean that the U.S. wins. They say that President Trump too often focuses on the trade deficit in goods and disregards the services. And I think that’s how he comes up with those numbers that don’t quite jive with the overall.”

The Top U.S. Deficits And Surpluses In 2017

Deficits

China: $336 billion deficit

European Union: $101 billion deficit

In this May 2018 image provided by Congressman Bill Pascrell's office, Rep. Pascrell, D-N.J., second from right seated at table, attends a meeting regarding trade with other colleagues and a Chinese delegation. After high-level talks last week in Washington, Beijing agreed in a joint statement with the U.S. to "substantially reduce" America's trade deficit with China, but did not commit to cut the gap by any specific amount. (Courtesy Congressman Bill Pascrell's Office via AP)

Mexico: $69 billion deficit

Surpluses

Hong Kong: $35 billion surplus

Brazil: $28 billion surplus

Singapore: $20 billion surplus

United Kingdom: $14 billion surplus