An Easy Way To Understand Trade Deficits (I promise)

Okay, I know “trade deficit” doesn’t exactly scream edge-of-your-seat excitement, and I don’t want to presume you don’t already know this stuff. But I’ll keep it short. This matters. You’ll see why.

Running a trade deficit just means we’re buying more from other countries than we’re selling to them. And why do we do that? Because they can make the products there and sell them to us more cheaply than we can make them here. We buy from them using our dollars, which they can’t really spend in their own countries so (for the most part) they reinvest those dollars in the US, putting them right back into our economy—buying our bonds, our real estate, funding our companies. That’s not a weakness on our part, that’s a power move. As an example, just think about how the cost of big flat screen TVs has dropped over the years.

Think of it like this: we’re the house in the global casino. Everyone wants to play at our table, and they’re more than happy to leave their chips with us. That’s what being the world’s reserve currency gets you. For other countries trade deficits might not be a good thing. but for us? Hell yeah!

Now about tariffs. Trump loves tariffs like they’re the Swiss Army knife of trade policy. But really, they’re just a tax hike dressed up as patriotism. When we slap tariffs on imported goods, prices go up—and we’re the ones paying. It’s like punching yourself in the face and calling it tough love. Trump says these tariffs willl generate $800 billion in new revenueue for the IRS, coming right out of the pockets of consumers. It’s a tax hike under another name.

That said, not all tariffs are evil. Sometimes they make sense—like when they’re used to protect critical industries or level the playing field against countries that don’t play fair. And hey, bringing some manufacturing back to the U.S.? Totally smart. Especially if tensions with China get worse. We don’t want to be stuck relying on overseas factories if shit hits the fan.

But going full throttle with broad tariffs? That’s not strategy, that’s just chaos. It invites retaliation, screws with supply chains, and freaks out investors.

Side note: CEO’s of US companies that inport foreign parts are paying between $1m for a group and $5m to have a one on one dinner with Trump at Mar-a-Lago; likely to have their imports exempted or to lobby to have their competitors targeted but not them. Historicallly, tariffs have been the source of massive government corruption.

So yeah, let’s have real conversations about trade and competitiveness. Let’s rebuild the parts of our economy that actually need shoring up. But let’s stop pretending a trade deficit means we’re losing. Most of the world would love to have our “problems.”

We’ve got the leverage. Let’s not fumble it because ‘someone’ doesn’t understand how the system works – or understands it all too well.