What does a "Trade Deficit" mean to the National Debt? (if anything)

[kyzr]

Trump says that many countries use unfair trade practices such as high tariffs on US goods.

So what happens if China, or the EU, or India have a positive trade balance with the US?

China is plus $270b as an example.

US Balance of Trade In Goods By Country - Brilliant Maps

The map above shows which countries the US has a trade surplus in goods (both manufactured and non-manufactured commodities) with and which ones it has a

brilliantmaps.com

Does the USA need to borrow $270b to pay that trade balance? If not, how is it resolved?

 

[Blackrook]

Instead of asking us on a poltical forum these questions, why don't you put in some effort and do your own research?

 

[Cougarbear]

Instead of asking us on a poltical forum these questions, why don't you put in some effort and do your own research?

Do you have an answer other than a smarty pants response?

 

[Cougarbear]

Trump says that many countries use unfair trade practices such as high tariffs on US goods.

So what happens if China, or the EU, or India have a positive trade balance with the US?

China is plus $270b as an example.

US Balance of Trade In Goods By Country - Brilliant Maps

The map above shows which countries the US has a trade surplus in goods (both manufactured and non-manufactured commodities) with and which ones it has a

brilliantmaps.com

Does the USA need to borrow $270b to pay that trade balance? If not, how is it resolved?

I may be wrong and am willing to be corrected but corporations like farms trade directly with the foreign countries. It just costs more for our corporations to do business in other countries than other countries doing business in the U.S. So, perhaps when it comes to corporate taxation, the U.S. will lose out.

 

[expat_panama]

Trump says that many countries use unfair trade practices such as high tariffs on US goods.

So what happens if China, or the EU, or India have a positive trade balance with the US?

China is plus $270b as an example.

US Balance of Trade In Goods By Country - Brilliant Maps

The map above shows which countries the US has a trade surplus in goods (both manufactured and non-manufactured commodities) with and which ones it has a

brilliantmaps.com

Does the USA need to borrow $270b to pay that trade balance? If not, how is it resolved?

You might want to sort out all these topics and get into them one at a time. You talked about tariffs and you talked about the "trade deficit".

First tariffs. A tariff is a tax on imports. The U.S. is taxed so heavily that if you lower rates you raise revenue, so the fact that the U.S. has lowered rates over the decades has resulted in increased tariff revenue. Many other countries that we trade w/ have tariffs on U.S. goods and that's their choice. We could raise our tariffs on their goods, we could hit 'em w/ a stick, I'm not sure what would work or why we want to change what others do.

Trade Balance. When we buy & sell stuff from foreigners we spend our dollars which have to be converted into foreign money for buying stuff. If we bot more than we sold then the currency would change value and that would up our dollar purchase price and we'd buy less. So what we buy & sell tends to balance out. Trade w/ foreigners is goods and it's capital stuff like stocks'n'bonds. If we buy goods and sell stocks'n'bonds then they call that a "trade deficit".

Isn't that easy?

 

[kyzr]

You might want to sort out all these topics and get into them one at a time. You talked about tariffs and you talked about the "trade deficit".
First tariffs. A tariff is a tax on imports. The U.S. is taxed so heavily that if you lower rates you raise revenue, so the fact that the U.S. has lowered rates over the decades has resulted in increased tariff revenue. Many other countries that we trade w/ have tariffs on U.S. goods and that's their choice. We could raise our tariffs on their goods, we could hit 'em w/ a stick, I'm not sure what would work or why we want to change what others do.

We are going to raise tariffs on imports to the exact same tariff hat country has on US goods. Trump thinks that a trade deficit is bad for some reason. Your answer below seems to say that the currency values balance out any trade deficit. I'm not sure ho that works. China is plus $270b with the US, so we pay them $100b and say its $270b because our dollar is worth more than their Yuan?? Or, if I buy a Mercedes, and pay $100,000 and Germany ends up with a $50b trade surplus, my $100k goes to Germany via a bank transfer converted to Euros, so the US lost $50b from the US money supply? Plus China's $270b means what to the US? I'm no seeing the big picture problem Trump sees with long term massive trade deficits. What bad thing happens?

Trade Balance. When we buy & sell stuff from foreigners we spend our dollars which have to be converted into foreign money for buying stuff. If we bot more than we sold then the currency would change value and that would up our dollar purchase price and we'd buy less. So what we buy & sell tends to balance out. Trade w/ foreigners is goods and it's capital stuff like stocks'n'bonds. If we buy goods and sell stocks'n'bonds then they call that a "trade deficit". Isn't that easy?

Not easy. Very Complicated. I'm thinking that the banks figure out the money movements and how that affects the currencies, but then we hear China devalued their currency and that upsets the apple-cart. So the Fed nor Treasury needs to send money overseas to cover a trade deficit, its all handled by banks and currencies, correct?

 

[JohnDB]

Because we buy 270 Billion more dollars of goods from China than they buy from the USA. Which in the global economy that means that China is getting the USA's wealth.

 

[task0778]

What does a "Trade Deficit" mean to the National Debt? (if anything)​

The trade deficit has absolutely nothing to do with US national debt, other than the fact that tariffs are a form of income for the federal gov't. It is a very small amount of income though, and the reality is that US consumers end up paying for the higher tariffs when they buy the imported products, because of course the US merchants raise the price to cover the higher costs. It is a tax by another name.

And the flip side that doesn't get discussed much is the retaliation by foreign gov'ts when they raise tariffs on our stuff that we export to them. There's an associated loss of income and jobs in those affected US industries, so - in theory a tariff reduces imports and the retaliation reduces exports. So, the increase in gov't revenue from the higher tariffs is offset somewhat by the loss of jobs in industries hit by the retaliation. And nobody really knows if the trade deficit will actually change much, the amount of trade drops but the imbalance might not.

And here's the kicker: prices go up in the US but productivity does not, at least not by as much. That's called inflation. Maybe not by much and nobody really knows what the retaliation will be. Review the Smoot-Hawley Act about a century ago, it wasn't a good idea then and it isn't now either.

 

[expat_panama]

Here's a reply post in the hopes that I'll either set the record straight (and save someone a lot of grief) or I'll learn something I hadn't thought of (it happens).

We are going to...

Predicting the future is hard. I'll believe higher trade tariffs when I see them. So far new tariffs have been just a diplomatic tool --none for Canada/Mexico/Columbia/etc. & plenty for China.

... raise tariffs on imports to the exact same tariff hat country has on US goods....

The U.S. has few/none tariffs on Panama because of CAFTA, and Panama has HUGE tariffs on U.S. cars. Sure, the U.S. could levy huge tariffs on Panamanian built cars but there aren't any.

...Trump thinks that a trade deficit is bad for some reason...

We don't really know that. All we know is that he SAYS a trade deficit is bad for some reason. My guess is that he SAYS that as a diplomatic tool to induce better bargaining results.

...Your answer below seems to say that the currency values balance out any trade deficit. I'm not sure ho that works...

It's simple enough to understand, If an American buys $1,000 worth of Chinese lithium and some Chinese guy buys $1,000 of Google stock then there's no change in the yuan/dollar rate. We get a $1k increase in the "trade deficit" and a $1k increase in the capital surplus. fwiw, we also get a lot of depreciation of the yuan because many believe the Chinese economy is tanking. That in turn means that the $1,000 buys more and more lithium every day.

...if I buy a Mercedes, and pay $100,000 and Germany ends up with a $50b trade surplus...

--because while you paid $100,000 to some U.S. dealer who shipped the car from the Mercedes factory in either Alabama or South Carolina depending on the model --

OK, I know what you're trying to say here. You bot $100k of German goods while other Americans spent $49,999,900,000 on VW's & beer and that's a $50B "trade deficit". At the same time a bunch of Germans bot $50B worth of S&P 500 stocks'n'bonds. At the same time the euro is falling w/ the dollar because Europe's economy is going nowhere while the U.S. is doing OK.

... I'm no seeing the big picture problem Trump sees with long term massive trade deficits. What bad thing happens?...

My take is that Trump SAYS the trade deficit is bad and he uses tariffs for isolating bad countries like China where he stops buying their lithium and buys it for the Ukraine instead. Fine w/ me.

... the Fed nor Treasury needs to send money overseas...

That stuff is all done electronically these days.

...to cover a trade deficit, its all handled by banks and currencies, correct?

The trade deficit (what the econ geeks call the "current account deficit") is covered by the capital surplus. There's no loss of money by the U.S. The only reason we hear about a "trade deficit" problem is because some people just love problems even if they're bogus.

 

[task0778]

So the Fed nor Treasury needs to send money overseas to cover a trade deficit, its all handled by banks and currencies, correct?

The trade deficit is an accumulation of individual business transactions that the US Gov't has no part of. The US business that orders the foreign product or materials pays the foreign supplier with US dollars. The foreign supplier can buy stuff from another US business or invest in our stock market or buy US assets with it, subject to US law.

 

[The Sage of Main Street]

Trump says that many countries use unfair trade practices such as high tariffs on US goods.

So what happens if China, or the EU, or India have a positive trade balance with the US?

China is plus $270b as an example.

US Balance of Trade In Goods By Country - Brilliant Maps

The map above shows which countries the US has a trade surplus in goods (both manufactured and non-manufactured commodities) with and which ones it has a

brilliantmaps.com

Does the USA need to borrow $270b to pay that trade balance?

Draining into Emptiness

 

[kyzr]

The trade deficit is an accumulation of individual business transactions that the US Gov't has no part of. The US business that orders the foreign product or materials pays the foreign supplier with US dollars. The foreign supplier can buy stuff from another US business or invest in our stock market or buy US assets with it, subject to US law.

You are saying the dollars always stay here, like a debit card for US products only.
That is basically the question I was asking. What happens to the "current account deficit"?

 

[task0778]

You are saying the dollars always stay here, like a debit card for US products only.
That is basically the question I was asking. What happens to the "current account deficit"?

The US business pays in US dollars for the imported stuff to the foreign business for them to spend as they see fit. It might be in a US bank account or a foreign bank but it makes no difference cuz it's their money. They can invest those dollars in US Gov't securities or US assets, subject to US law. To be clear, the Fed and the US Treasury have absolutely nothing to with the transaction.

Maybe I am misunderstanding your question about the current account deficit. That is merely a composite accounting number than indicates much money goes out to foreign companies relative to how much money US companies get for their stuff they sell overseas. The US gov't doesn't play a direct role in any of that, except when it comes to protectionist measures such as tariffs. I heard that China exports more than $250 billion dollars worth of stuff to us over whatever they buy from us. But the US Gov't doesn't give the Chinese Gov't anything, it's all done at the individual company level.

"What does a "Trade Deficit" mean to the National Debt? (if anything)"​

IF this is what you're asking then the answer is not a damn thing.