# Is a trade deficit such a bad thing? **URL:** \ **Category:** Great Debates\ **Created:** [March 15, 2018, 11:42am UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599 "2018-03-15T11:42:23Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Darren\_Garrison](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/darren_garrison/32/92_2.png) [@Darren\_Garrison](https://boards.straightdope.com/u/Darren_Garrison)\ **Post date:** [March 15, 2018, 11:42am UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/1 "2018-03-15T11:42:23Z")
Sorry if this has been hashed out before (I don’t follow GD too closely) but does it really matter that much that each and every country buy and sell equal amounts with each country that they trade with? Should anyone care that we, for example, buy $900 million in goods every year from Ethnicistan but Ethnicistan buys only $500 million a year from us? [Trump seems obsessed](https://www.rawstory.com/2018/03/didnt-even-know-trump-boasts-making-information-meeting-canadas-trudeau/) with it, but I don’t get why it is a big deal–you don’t have grocers telling the newsstand guy that they won’t buy a magazine unless he buys a gallon of milk. ---
**Author:** ![Bryan\_Ekers](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bryan_ekers/32/183_2.png) [@Bryan\_Ekers](https://boards.straightdope.com/u/Bryan_Ekers)\ **Post date:** [March 15, 2018, 1:15pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/2 "2018-03-15T13:15:25Z")
I guess if it risks runaway inflation, where your nation’s currency become increasingly worthless because you’ve lost productivity or what exports you have become less valuable (i.e. your primary export is oil and oil prices drop)… hmmm, gotta give this one some thought. If OPEC wasn’t controlling (or at least heavily influencing) international oil prices, could the member nations slide into trade deficits and currency devaluation if: 1. Oil prices fall significantly 2. Their demand for foreign goods remains the same 3. They cannot or at least have not developed local industry to meet the demand in (2) I gather a diversified economy is the best defense - a country could tolerate a pretty high trade deficit without problems. ---
**Author:** ![Crotalus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/crotalus/32/41_2.png) [@Crotalus](https://boards.straightdope.com/u/Crotalus)\ **Post date:** [March 15, 2018, 1:21pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/3 "2018-03-15T13:21:39Z")
I think you nailed it with your grocer example. I’ve been running a trade deficit with every store I’ve ever bought from since my teen years. And yet I’m solvent. Trump’s understanding of this seems to leave out the goods and services that are changing hands. ---
**Author:** ![Bryan\_Ekers](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bryan_ekers/32/183_2.png) [@Bryan\_Ekers](https://boards.straightdope.com/u/Bryan_Ekers)\ **Post date:** [March 15, 2018, 1:33pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/4 "2018-03-15T13:33:59Z")
On skimming the wiki page, I seethis quote from Adam Smith: > [@](#): > > “In the foregoing part of this chapter I have endeavoured to show, even upon the principles of the commercial system, how unnecessary it is to lay extraordinary restraints upon the importation of goods from those countries with which the balance of trade is supposed to be disadvantageous. Nothing, however, can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce are founded. When two places trade with one another, this [absurd] doctrine supposes that, if the balance be even, neither of them either loses or gains; but if it leans in any degree to one side, that one of them loses and the other gains in proportion to its declension from the exact equilibrium.” Even in 1776, Smith was scorning the notion that the side with the trade deficit was somehow the loser. Further, if the net effect of a trade deficit with China and Japan is those countries end up owning a lot of U.S. debt, well… when has owing people money ever been a concern of Trump’s? It’s a complex issue, but Trump sells it as a simple one, which I can’t imagine comes as a shock to anyone. ---
**Author:** ![DrCube](https://avatars.discourse-cdn.com/v4/letter/d/a3d4f5/32.png) [@DrCube](https://boards.straightdope.com/u/DrCube)\ **Post date:** [March 15, 2018, 4:00pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/5 "2018-03-15T16:00:34Z")
All trades that aren’t coerced are just that: trades. One thing exchanged for another of equal value. How can you have a deficit if both sides of the trade got something of equal value? It’s better than that, even, because nobody buys something unless they value that item _more_ than the money they spend on it; and conversely, nobody sells something unless they value the money they receive _more_ than the thing they’re selling. So trade makes both parties _wealthier_ than they were before the trade. It’s not just a simple breaking even, it’s actually a great benefit. ---
**Author:** ![Horatius](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/horatius/32/3572_2.png) [@Horatius](https://boards.straightdope.com/u/Horatius)\ **Post date:** [March 15, 2018, 5:20pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/6 "2018-03-15T17:20:39Z")
This zero-sum notion of trade also rests on the unstated assumption that you cannot create new wealth via manufacturing. If you buy a billion dollars worth of Chinese Steel, and turn that into two billion dollars worth of products, you’ve created wealth, even if you just sell those products to fellow citizens, and not to anyone in China. There’s a “trade deficit”, but you’re still ahead of the game after all the numbers are crunched. ---
**Author:** ![YamatoTwinkie](https://avatars.discourse-cdn.com/v4/letter/y/cc9497/32.png) [@YamatoTwinkie](https://boards.straightdope.com/u/YamatoTwinkie)\ **Post date:** [March 15, 2018, 5:23pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/7 "2018-03-15T17:23:46Z")
A country having an _overall_ trade deficit is probably a bad thing, but on an individual per-country basis, it’s nonsense to care about. If the US buys $1 billion of vibranium from Wakanda, and we use it to manufacture and export $20 billion worth of indestructible toothbrushes to the rest of the word, who gives a crap if Wakanda doesn’t buy any? Sure the US could try and play hardball in order to force them to buy $1 billion of our other crap, to ensure we’re not running a trade deficit. And they can refuse, turn around and sell their $1 billion of vibranium to China instead. Who stands more to lose in this scenario? ---
**Author:** ![Pleonast](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pleonast/32/1183_2.png) [@Pleonast](https://boards.straightdope.com/u/Pleonast)\ **Post date:** [March 15, 2018, 7:53pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/8 "2018-03-15T19:53:55Z")
> [@DrCube](#): > > All trades that aren’t coerced are just that: trades. One thing exchanged for another of equal value. How can you have a deficit if both sides of the trade got something of equal value? > > It’s better than that, even, because nobody buys something unless they value that item _more_ than the money they spend on it; and conversely, nobody sells something unless they value the money they receive _more_ than the thing they’re selling. So trade makes both parties _wealthier_ than they were before the trade. It’s not just a simple breaking even, it’s actually a great benefit. Exactly right. We really need to make [double-entry bookkeeping](https://en.wikipedia.org/wiki/Double-entry_bookkeeping_system) a standard part of high school curriculum. (I’d even replace geometry; it’s more important.) There are so many economic fallacies that are eliminated by understanding it. ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [March 16, 2018, 12:24am UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/9 "2018-03-16T00:24:25Z")
> [@YamatoTwinkie](#): > > A country having an _overall_ trade deficit is probably a bad thing, but on an individual per-country basis, it’s nonsense to care about. Even this is not necessarily true. If a developed country only has a trade deficit involves importing raw materials from resource rich but overall poorer nations and otherwise has trade balance with all other nations, there’s nothing there that’s necessarily a problem. It could potentially be a problem but there’s no _a priori_ reason it has to be. But that’s also true for the countries running large trade surpluses should that trade ever dry up. Basically, trade surpluses and deficits aren’t inherently good or bad whether they are overall surpluses/deficits or with individual countries. The context always matters. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [March 16, 2018, 10:33am UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/10 "2018-03-16T10:33:01Z")
Should the U.S. buy steel from China? Or should we buy it from Pennsylvania, putting unemployed Pennsylvanians back to work, even if that steel is a _little_ more expensive. All else equal, the Pennsylvania steel is better for the U.S., for sufficiently small values of “little.” ---
**Author:** ![galen\_ubal](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/galen_ubal/32/4440_2.png) [@galen\_ubal](https://boards.straightdope.com/u/galen_ubal)\ **Post date:** [March 16, 2018, 10:54am UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/11 "2018-03-16T10:54:13Z")
> [@septimus](#): > > Should the U.S. buy steel from China? Or should we buy it from Pennsylvania, putting unemployed Pennsylvanians back to work, even if that steel is a _little_ more expensive. All else equal, the Pennsylvania steel is better for the U.S., for sufficiently small values of “little.” Serious question: What steel mills? What steel workers, for that matter? That area has been “the Rust Belt” for _decades_. Is there anything even close to the manufacturing capacity needed within the US? How long would it take to (re)build the steel mills, to train the workers? How many workers would there be, in a modern, largely automated factory? ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [March 16, 2018, 11:15am UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/12 "2018-03-16T11:15:15Z")
> [@galen\_ubal](#): > > Serious question: > What steel mills? What steel workers, for that matter? > That area has been “the Rust Belt” for _decades_. Is there anything even close to the manufacturing capacity needed within the US? How long would it take to (re)build the steel mills, to train the workers? How many workers would there be, in a modern, largely automated factory? I don’t know. My response was hypothetical, just using _steel_ as an example. I’ve read that the Trump Tweet about steel and aluminum tariffs came immediately after some steel and aluminum execs appeared on Fox TV, and in response to an election in the Rusty Pennsylvania. If my use of steel as the example suggests that I might think something useful or intelligent has _ever_ emerged from _any_ of Trump’s orifices I do apologize for misleading you. ---
**Author:** ![Snarky\_Kong](https://avatars.discourse-cdn.com/v4/letter/s/a183cd/32.png) [@Snarky\_Kong](https://boards.straightdope.com/u/Snarky_Kong)\ **Post date:** [March 16, 2018, 11:52am UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/13 "2018-03-16T11:52:00Z")
> [@septimus](#): > > Should the U.S. buy steel from China? Or should we buy it from Pennsylvania, putting unemployed Pennsylvanians back to work, even if that steel is a _little_ more expensive. All else equal, the Pennsylvania steel is better for the U.S., for sufficiently small values of “little.” We should buy steel from China and have people in Pennsylvania do something else. ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [March 16, 2018, 12:39pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/14 "2018-03-16T12:39:40Z")
There’s the rub, isn’t it? “All else equal” is great in theory but never actually happens. The reality is there’s not a lot that is equal, so all sides can benefit from trade, even if that means trade deficits for some and trade surpluses for others. ---
**Author:** ![Deeg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/deeg/32/2955_2.png) [@Deeg](https://boards.straightdope.com/u/Deeg)\ **Post date:** [March 16, 2018, 6:16pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/15 "2018-03-16T18:16:10Z")
One way to look at it (which is just a small piece of the whole economic puzzle) is that when we have a trade deficit we are sending dollars overseas in return for goods and services. As long as our economy stays large and diversified it’s actually a pretty good deal: we trade paper bills (or little bits on a database somewhere) for hard goods like cars, computers, and steel. In macro economics it’s pretty rare that something is all bad or all good. ---
**Author:** ![squidfood](https://avatars.discourse-cdn.com/v4/letter/s/a87d85/32.png) [@squidfood](https://boards.straightdope.com/u/squidfood)\ **Post date:** [March 16, 2018, 6:48pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/16 "2018-03-16T18:48:47Z")
> [@Crotalus](#): > > I think you nailed it with your grocer example. I’ve been running a trade deficit with every store I’ve ever bought from since my teen years. And yet I’m solvent. Trump’s understanding of this seems to leave out the goods and services that are changing hands. That’s not the right analogy for personal finances. The better local analogy is “I spent all my money at Amazon to save a few $$, so the store down the street isn’t there anymore. And now that the local shop is gone, their employees aren’t buying stuff in _my_ shop.” Indirectly that _is_ the grocer telling the magazine guy that is has to go both ways. ---
**Author:** ![SmartAlecCat](https://avatars.discourse-cdn.com/v4/letter/s/67e7ee/32.png) [@SmartAlecCat](https://boards.straightdope.com/u/SmartAlecCat)\ **Post date:** [March 16, 2018, 7:24pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/17 "2018-03-16T19:24:03Z")
> [@septimus](#): > > Should the U.S. buy steel from China? Or should we buy it from Pennsylvania, putting unemployed Pennsylvanians back to work, even if that steel is a _little_ more expensive. We’re still making steel, not as much as 1973, but still quite a bit. > **[United States Steel Production](https://tradingeconomics.com/united-states/steel-production)** > > Steel Production in the United States increased to 6900 Thousand Tonnes in March from 6500 Thousand Tonnes in February of 2024. This page has Steel Production values for United States. > [@](#): > > Steel Production in the United States increased to 6822 Thousand Tonnes in January from 6760 Thousand Tonnes in December of 2017. Steel Production in the United States averaged 7922.48 Thousand Tonnes from 1969 until 2018, reaching an all time high of 11951 Thousand Tonnes in May of 1973 and a record low of 3799 Thousand Tonnes in April of 2009. We are, however, employing a lot fewer steel workers: > **[About AISI - American Iron and Steel Institute](https://www.steel.org/about-aisi/)** > > AISI serves as the voice of the American steel industry in the public policy arena and advances the case for steel in the marketplace as the preferred material of choice. > [@](#): > > Labor productivity has seen a five-fold increase since the early 1980s, going from an average of 10.1 man-hours per finished ton to an average of 1.9 man-hours per finished ton of steel in 2015. Even if we produced the amount of steel we did in the 70s, we would not be employing the numbers of workers we did then. By raising the price of all of our steel products, we would likely be damaging steel using industries even more… ---
**Author:** ![SmartAlecCat](https://avatars.discourse-cdn.com/v4/letter/s/67e7ee/32.png) [@SmartAlecCat](https://boards.straightdope.com/u/SmartAlecCat)\ **Post date:** [March 16, 2018, 7:36pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/18 "2018-03-16T19:36:36Z")
> [@septimus](#): > > I’ve read that the Trump Tweet about steel and aluminum tariffs came immediately after some steel and aluminum execs appeared on Fox TV, and in response to an election in the Rusty Pennsylvania. If that is that is the question – I’ll grant that the steel and aluminum tariffs will indeed benefit their executives. ---
**Author:** ![octopus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/octopus/32/3716_2.png) [@octopus](https://boards.straightdope.com/u/octopus)\ **Post date:** [March 16, 2018, 7:48pm UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/19 "2018-03-16T19:48:02Z")
> [@Snarky\_Kong](#): > > We should buy steel from China and have people in Pennsylvania do something else. Why? It’s not like American labor is intrinsically more valuable than immigrant or overseas labor. ---
**Author:** ![Mijin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mijin/32/9369_2.png) [@Mijin](https://boards.straightdope.com/u/Mijin)\ **Post date:** [March 17, 2018, 3:07am UTC](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599/20 "2018-03-17T03:07:43Z")
> [@septimus](#): > > Should the U.S. buy steel from China? Or should we buy it from Pennsylvania, putting unemployed Pennsylvanians back to work, even if that steel is a _little_ more expensive. All else equal, the Pennsylvania steel is better for the U.S., for sufficiently small values of “little.” This is an understandable view, but it’s short-sighted because steel is used to make things. So firstly, it’s not just the cost of steel that increases, but the cost of a whole plethora of goods used by both industry and consumers. So the knock-on effects are potentially huge; likely orders of magnitude more than just paying all the former steelworkers to retrain into other industries. Secondly it means many US exports will become less competitive, since US industry will be paying more for their steel, which may cost some jobs. So this idea may _increase_ unemployment. [Next page](https://boards.straightdope.com/t/is-a-trade-deficit-such-a-bad-thing/810599.md?page=2)