I hear on CNN & MSNBC stupid people saying that trade deficits don't matter. Maybe they are socialists in a capitalistic country, but here are a few reasons why they are wrong.
1. If I have a trade surplus, you are either giving me your money, or borrowing money to pay me.
2. If I have a trade deficit, I am borrowing money to pay someone to buy stuff.
Countries with trade surpluses can buy factories and properties in debtor countries, their currency is strong, their credit rating is strong, just the opposite for debtor countries.
IMHO it is much better to have a trade surplus than a trade deficit.
It’s not a question with one answer for all occasions. There are many factors to be considered...current economy, growth rate, population growth, etc.
Do you want debt on an asset which is depreciating or appreciating?
Its not the microeconomic effect on an asset, its the macroeconomic effect on the US economy that concerns me. As I said in subsequent posts: foreign steel dumping causes our steel plants to close, foreign governments subsidizing foreign cars hurts domestic car manufacturing, foreign governments stealing intellectual property hurts long term US employment, etc. Good paying jobs don't grow on trees, Trump is working to create more good paying US jobs.
My point is there is not a simple answer that holds for all circumstances. I think you are concocting an argument against trade deficits to bolster what Trump is doing, so your argument is based on politics not intellect.
Of course perhaps you know more about this than Milton Friedman. He disagrees with you and Trump-
Milton Friedman schools Donald Trump and others who suffer from 'upside-down' thinking on trade and protectionism - AEI
In the international trade area, the language is almost always about how we must export, and what’s really good is an industry that produces exports, and if we buy from abroad and import, that’s bad. But surely that’s upside-down. What we send abroad, we can’t eat, we can’t wear, we can’t use for our houses. The goods and services we send abroad, are goods and services not available to us. On the other hand, the goods and services we import, they provide us with TV sets we can watch, with automobiles we can drive, with all sorts of nice things for us to use.
The gain from foreign trade is what we import. What we export is a cost of getting those imports. And the proper objective for a nation as Adam Smith put it, is to arrange things so that we get as large a volume of imports as possible, for as small a volume of exports as possible.
This carries over to the terminology we use. When people talk about a favorable balance of trade, what is that term taken to mean? It’s taken to mean that we export more than we import. But from the point of our well-being, that’s an unfavorable balance. That means we’re sending out more goods and getting fewer in. Each of you in your private household would know better than that. You don’t regard it as a favorable balance, when you have to send out more goods to get fewer coming in. It’s favorable when you can get more by sending out less.
Following that discussion, Friedman next discusses
