Why It Matters Mind the Trade Gap
Jun 3, 2025
Brad Setser, a senior fellow at CFR specializing in global trade, and Heather Hurlburt, an expert at Chatham House, dive into the complex world of the U.S. trade deficit. They explore whether this deficit is truly detrimental, arguing that it can enhance economic variety and attract foreign investment. The discussion also unpacks the historical context of trade relations, the nuances of tax impacts, and how these factors directly affect American jobs and consumer prices, challenging the oversimplified narratives around trade deficits.
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Trade Deficits Can Be Justified
- Trade deficits aren't inherently bad and can reflect a growing, investing economy pursuing future income.
- They become risky when driven by consumption and public spending rather than investment, especially if lasting long.
Different Views on Trade Deficits
- Trade deficits are often seen as reflecting lost jobs or a moral failing of overconsumption.
- However, they are also just an economic measure in a complex global system involving services and currency flows.
Politics Shape Trade Deficit Views
- Trade deficits became politically significant under Trump, who linked them to unfairness and introduced tariffs.
- Tariffs mostly target bilateral deficits but economic consensus finds bilateral deficits unreliable measures of fairness.