Why Does the US Always Run a Trade Deficit?

The U.S. trade deficit persists due to fundamental macroeconomic imbalances rather than just export shortfalls, according to Federal Reserve Bank of New York economist Thomas Klitgaard. His analysis shows the deficit reflects a persistent gap between domestic saving and investment spending, with the U.S. borrowing from foreign sources to fund domestic investment when savings fall short. This macroeconomic reality means targeting specific trade categories won't resolve the overall imbalance -- even when the petroleum deficit disappeared by 2019 due to increased domestic production, the total trade deficit grew to $441 billion, consistent with a widening saving gap. Bureau of Economic Analysis data reveals household saving has remained below pre-pandemic levels as consumers spend down accumulated savings from 2020-21, while business saving has remained relatively stable. Reducing the deficit would require significant macroeconomic adjustments, including higher domestic saving or reduced investment spending, which studies indicate would likely cause economic pain as demonstrated during the 2008 recession. Read more of this story at Slashdot.

May 21, 2025 - 22:50

Why Does the US Always Run a Trade Deficit?

The U.S. trade deficit persists due to fundamental macroeconomic imbalances rather than just export shortfalls, according to Federal Reserve Bank of New York economist Thomas Klitgaard. His analysis shows the deficit reflects a persistent gap between domestic saving and investment spending, with the U.S. borrowing from foreign sources to fund domestic investment when savings fall short. This macroeconomic reality means targeting specific trade categories won't resolve the overall imbalance -- even when the petroleum deficit disappeared by 2019 due to increased domestic production, the total trade deficit grew to $441 billion, consistent with a widening saving gap. Bureau of Economic Analysis data reveals household saving has remained below pre-pandemic levels as consumers spend down accumulated savings from 2020-21, while business saving has remained relatively stable. Reducing the deficit would require significant macroeconomic adjustments, including higher domestic saving or reduced investment spending, which studies indicate would likely cause economic pain as demonstrated during the 2008 recession.