U.S. trade deficit grows at fastest pace in 19 months – is this a bad thing?
United States President-Elect Donald Trump won’t like this: the U.S. trade deficit has gone up.
The American trade deficit increased at the fastest pace in 19 months as it rose 18 percent in October to $42.6 billion. This is because of the jump in higher imported goods and the rate of exports stayed flat.
Overall, the U.S. trade deficit this year is $408 billion, up 2.1 percent from the same time a year ago.
The latest numbers suggest that the U.S. is an economy that imports goods and exports services – its goods deficit stands at more than $600 billion.
Simply put: it’s importing more than it exports.
Trump has often lambasted the trade deficit as a matter of “they win, we lose.” But is really that cut and dry? Nope, says legendary free market economist Walt Williams.
Here is what Williams wrote earlier this year:
“Let’s look at the political angst over trade deficits. A trade deficit is when people in one country buy more from another country than the other country’s people buy from them. There cannot be a trade deficit in a true economic sense. Let’s examine this.“I buy more from my grocer than he buys from me. That means I have a trade deficit with my grocer. My grocer buys more from his wholesaler than his wholesaler buys from him. But there is really no trade imbalance, whether my grocer is down the street, in Canada or, God forbid, in China.“Here is what happens: When I purchase $100 worth of groceries, my goods account (groceries) rises, but my capital account (money) falls by $100. For my grocer, it is the opposite. His goods account falls by $100, but his capital account rises by $100. Looking at only the goods account, we would see trade deficits, but if we included the capital accounts, we would see a trade balance. That is true whether we are talking about domestic trade or we are talking about foreign trade.”
Here is also an excerpt from legendary free market economist Murray Rothbard during a 1989 presentation regarding protectionism and trade deficits: