1. Balance of Trade, Balance of Power: How the Trade Deficit Reflects U.S. Influence in the World
- Author:
- Daniel Griswold and Andreas Freytag
- Publication Date:
- 04-2023
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- The U.S. trade deficit is a misunderstood symbol of U.S. economic strength and influence in the world. The deficit is not driven by unfair trade abroad or industrial weakness at home and, as the Trump years show, cannot be “fixed” through higher tariffs. Instead, the trade deficit is driven by a persistent net inflow of foreign capital, which reduces interest rates and fuels economic output. Contrary to myth, the trade deficit is not a cause of deindustrialization or a loss of manufacturing jobs. In fact, the current balance of trade points to America’s continuing influence in global affairs—as a haven for global investment, as a robust producer and buyer of global goods and services, and as the provider of a strong dollar that remains at the center of the global economy. Policymakers should reject measures that restrict trade and foreign investment and instead seek to expand America’s commercial ties to the rest of the world.
- Topic:
- Foreign Policy, Economy, Trade, and Trade Deficit
- Political Geography:
- North America and United States of America