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Looking at this chart of US trade deficits and surpluses, I can already hear the narrative forming: "The US is losing. We're being taken advantage of. Look at those massive deficits with China, the EU, and Mexico!" But this perspective fundamentally misunderstands global economics in the 21st century. What the headlines miss: 1️⃣ The US dollar is the world’s reserve currency, which means foreign governments and institutions hold large amounts of it. When they hold non-interest-bearing dollars (such as physical currency or certain reserve balances), it effectively serves as an interest-free loan to the United States. Even interest-bearing Treasury securities benefit from lower yields thanks to global demand. This "exorbitant privilege" helps the US finance deficits at remarkably low costs. 2️⃣ The US Treasury market is the largest, most liquid government bond market globally. Foreign entities don't just sell the US goods – they turn around and invest those dollars into the US market, funding American innovation and growth. 3️⃣ The US is a service-based economy, but the US trade deficits we currently hear about in the media are goods only. The US runs significant surpluses in services (think: tech, finance, entertainment, education) that aren't reflected here. 4️⃣ The dollar itself is the US' greatest export. When other countries use USD for transactions, they're effectively paying us for the privilege through seigniorage. 5️⃣ US consumer benefits are enormous. Americans enjoy lower-priced goods that improve living standards across income levels. The narrative that the US is being "ripped off" misses the reality of the US' economic position. Trade deficits reflect capital flows and are not scorecards. A trade deficit simply means Americans are buying more foreign goods than foreigners are buying American goods. But those dollars don't disappear – they return as investments in American companies, real estate, and government bonds. This isn't to say there aren't legitimate concerns about specific trade practices. But fixating on the deficit number alone is like judging a book by counting its pages rather than reading it. What are your thoughts? Is America's trade position misunderstood? #Economics #GlobalTrade #TradeDeficit #USEconomy #InternationalFinance
Have you got the data for a full balance of trade visual i e including services
Man, this is crap. Either one lists the EU or it's member states. Everything else is double counting. EU includes Ireland, Germany, The Netherlands, Belgium. And the other take is: The US get stuff way cheaper through this. They import it, because it's cheaper than producing it locally. Plus they won't have the production capabilities and people to produce everything they import on top of what they consume from local production. And that was the business case to date. The new administration tries to rebalance this from their perspective. Which - locally a good thing - might bring up demand for local workforce, while at the same time it will drastically increase prices. Or, if prices shall stay down, workforce costs need to decrease by massive reduction of hourly wages. Or, the third alternative, all other things being equal, you reduce demand for stuff. So stable demand for workforce, stable prices, but way less things you can buy. Sounds a bit like the Soviet Union.
I agree with this but also you have to factor in how much money we spend in these countries to keep them safe. I've noticed over the last 25 years many Americans that visit Europe do not understand the massive amount of capital expenditures we have in places like Germany and South Korea. When you see this for yourself first hand you do get the impression we are getting taken advantage of. These commitments are now starting to take a toll on the country. Not saying we should leave these places, but those countries need to start helping us out more.
With Manufacturing sector in the United States having contracted for such an extended period (26 months), there is currently a domestic production issue in the United States. As a result, the United States has a massive trade deficit with China and the European Union due to high consumer demand for cheaper imported goods. More specifically in electronics, automobiles, and industrial components. During this period with a strong #DXY, imports were more affordable while making American exports more expensive, further widening the trade gap. China’s low-cost manufacturing and government subsidies give it a competitive edge, while the EU dominates high-value industries like pharmaceuticals and aerospace. Hence, reducing opportunities for the United States to export. Global supply chains and outsourcing also play a role, as many American companies manufacture abroad to cut costs. Moreover, increasing imports while reducing domestic production. Additionally, trade barriers and China’s export-driven policies restrict the United States access to foreign markets, making it harder to balance trade.
Demand for the $ is dying! Rapidly! Petrodollar died in 2024 so no country needs $s to buy oil! So US has to pay higher interest rates to borrow. And before Trump, US was borrowing ludicrous, unsustainable sums. Russia & China have worked for 10+ years to separate from dependency on $. They are not going back now. And Russia & China can easily develop their own services. This is absolute crunch time for the US! There are only 3 core ways to generate wealth: 1 mining 2 agriculture 3 manufacturing Without these, youare dependent upon another country. The East understands this. Trump understands too. And that running a $2tn deficit per year is completely unsustainable.
These raw numbers can be misleading. US is in a deficit to Canada because of the amount of oil purchased from Canada, not necessarily due to tariffs. Likewise with China - it is about the quantity & type of goods purchased. Thus, by encouraging countries to invest in the US, develop a manufacturing plant & use US labor to produce the products, the dollars start to shift. EXAMPLE: Taiwan building a semiconductor plant in the US & using US labor to run the production, allowed them an offset to the proposed tariffs. EXAMPLE: Honda moving Civic manufacturing from Mexico to the US to avoid tariffs is another example. Both of these will.start to mive the charts and if uploaded to a world wide view may increase US GNP while reducing the average rate of tariffs the US incurs. Averaged across all countries on which the US imposes tarrifs, the average tariff rate is 3%. The US pays an average of 5% - 10% world wide in tariffs. Country by country we see wide variances depending on product, quantity & country of origin. As a country, the US pays more than it receives, on average. Countries should each consider both the totality & the unique negotiations when making trade deals.
Economics 101 Comparative advantage dictates that nations gain from trade by specializing in goods they produce at a lower opportunity cost, even if another nation is more efficient overall. Opportunity cost reflects what's sacrificed to produce a good. Rather than absolute efficiency, relative efficiency matters. Specialization and trade allow each country to consume beyond its production possibilities. This principle drives international trade, emphasizing that mutual benefit arises from focusing on relative strengths, leading to increased global output and consumption. Source:Gemini AI
Finally a balanced view on numbers. Not just the imbecile narrative from the WH. If you realize the US is the biggest consumer market, and with the privilege of the US$ (if you can call it that) then this puts everything in a much more logical and balanced perspective.
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5dIt's not often I see an intelligent take on global macroeconomics here. This one hits the nail right on the head. The USD is the global reserve currency and the USA is printing it (out of thin air) This 4 years of current US leadership is a golden opportunity for something great. I hope (the USA and) the rest of the world doesn't miss it