Source: Exiled Policy
by Jason Pye
“A budget deficit occurs when the federal government spends more than it collects in revenue. It reflects fiscal policy choices. By contrast, the trade deficit is an accounting outcome. It simply means Americans buy more goods and services from abroad than foreigners buy from us. Treating the trade deficit as if it were the budget deficit leads to policy distortions. If you believe it represents money being ‘lost,’ you impose tariffs as a corrective tool. Those tariffs raise costs, invite retaliation, and shift supply chains without eliminating the macroeconomic forces producing the deficit in the first place. The result is higher prices at home and little measurable change in the overall balance. The trade deficit would be a concern if capital were not flowing into the United States. But the imbalance is matched — dollar-for-dollar — by capital flowing into the country.” (02/25/26)
https://exiledpolicy.substack.com/p/the-trade-deficit-is-the-dumbest