Should We Be Worried About Trade Deficits?


Donald Trump certainly thinks so,
and whether he’s right is probably the most important
economic question of the moment. I’m Noah Feldman.
This is The Method, where I break down hard questions
into the ideas and values behind them. Start with the president’s view.>>TRUMP: We have a $500
billion trade deficit with China.>>TRUMP: It’s the greatest
theft in the history of the world. A trade deficit simply measures
how much stuff our country is buying, from other countries, and how much
stuff they’re buying from us. That’s the number that
a trade deficit gives you, And according to the president,
it’s a powerful symbol indicating that the United States
when we’re in deficit isn’t making enough stuff. If we don’t make enough stuff,
runs the argument, we’re going to lose manufacturing jobs. Manufacturing jobs are what
make a country great, by giving us a good
and powerful middle class. And what’s more—
the United States should use all of the power at its disposal
to try to force other countries into reducing their trade
deficits with us, because that is supposed
to create more jobs. On the other hand, most economists
think that a trade deficit is almost completely unimportant, because in the end,
if we’re buying stuff from other countries, we’re buying that with money
that we have, that we’ve earned. By other countries investing in us , and by not focusing
on the purchase of stuff, our economy is freed up to do a lot
of other things— to build the internet, to build technology,
to deliver services— all the kinds of things that our
modern economy does that go way beyond stuff. And after all,
the problem with stuff is someone else can almost always
make it more cheaply. According to this view
it’s a big mistake to focus symbolically on how much stuff
you make. It’s guaranteed to push your economy backwards
rather than pushing it forwards. So do you think that trade
deficits are a very useful symbol of making stuff,
and that if you don’t make stuff your country declines,
or do you think that ultimately, economics is
about more than stuff, but actually about goods,
services and investment. Make your choice,
and you’ll know who you are. What do you think?
Let us know in the comments, and by all means tell us if you have
ideas or questions for future episodes.
Thanks for watching.

50 thoughts on “Should We Be Worried About Trade Deficits?

  1. I am very very very 1000% sure China can make very very very very CHEAP aircraft carriers, warplanes, missiles, guns and ammunition. According to this 'expert' professor, we should outsource these to China and focus on more 'important' stuffs. To hell with trade deficit. To hell with factory. To hell with jobs. We just want cheap stuff to grow our economy.

    The problem is China would want US to transfer the intellectual property to them so that they can make it cheaply for us. Maybe we should outsource all electronic devices manufacturing to China so that China can plant their spy gadgets in every devices. I mean US will become the world most advanced nation enjoying the most growth if we did exactly as this professor said. Only that one day when we woke up, we will find 100 Nimitz-class aircraft carriers parked outside US shore flying Chinese Communist flags and China' People Liberation Army (PLA) lining up Americans on the street to be sent to concentration camps. Those who resist will be given a uniquely Chinese Tiananmen reenactment experience right on their doorstep, of course not forgetting the 'trademark' move of using made-in-China cost effective US designed Abrams tank piloted by PLA to crush some American skulls.

  2. When was Trump an economist. During the campaign, he watched Fox! He watched Kudlow, Hannity, Bolton and Fox and Friends. He called them regularly! They gave him Policy advise!
    Then he brought in White Nationalists and drew racists by the hundreds! His Party is no longer Republican but White Nationalist! Headed by Trump

  3. USA should understand THERE R NO FREE LUNCHES IN LIFE. if u buy products by printing money instead of earned money then it is wrong. united states spend more than it should china produced more than it should both r wrong.

  4. trade deficits matter sir if not just sit in the home print dollars n buy products produced by others dnt u think it is wrong. TRUMP IS RIGHT ONLY ABOUT ONE THING DEFICITS. but instead of blaming other countries USA should reduce its spending that is d solution cut spending. reduce d military budget to $100bn THAT IS ENOUGH

  5. Most of the trade are done in USD and the countries who have trade surplus will eventually bring the money back and invest in US economy.

    Look at T-notes and bond investment by Japan or China for example or setting up manufacturing plants on US soil.

    Majority of manufacturing jobs are not coming back to USA from China but will go elsewhere that can produce it cheaper.

    US and its citizens have very low saving and too high debts, national debts 21.1 trillions plus 800 billions budget deficit this year that indicate an over spending.

    Debts should be a major concern as it can not be sustained.

    Cut spending especially defense(900 billions this year) or something big is gonna happen once no one cares to fund it.

  6. Bloomberg cares not, if a Steel worker in PA loses her job/house/marriage..
    Does not care if a Textile worker can no longer afford to to send their daughter/or son to college..
    Does not care if a auto worker loses their job,and has to take a job making less than half the money,and has no benefits…

    Bloomberg looks down from their Ivory tower ,on the Ants/working class!!!!!!!!!!!!!!

    Trump has done what he promised,love him or hate him!!!
    When has a politician,actually fulfilled the promises they made while campaigning???

    Never!

  7. There is a term in English we have for people (in this case lawyers talking about economy?) like you. It's called a straw man. Let me be fair, A trade deficit doesn't simply measure the difference in purchases of goods and services that we buy from other countries. If a US company produces a product in China, and that product is imported into the US… that figures as an import and affects the trade balance negatively as an import. So to say in the end whether it's making stuff is not the real question It's where you make the stuff that matters. If you constantly manufacture goods in China at cheaper labour costs and then import those goods to the US at lower prices than domestic manufacturers, that necessarily leads to FEWER jobs. It's not about creating new jobs, but maintaining current DOMESTIC JOBS in manufacturing.

    "MOST ECONOMISTS believe trade deficits are unimportant." (Where the hell did you get that idea?) THEY ARE IMPORTANT, but they are not the ONLY FACTOR to consider. At the end of the video you basically left people to choose between two things that influence the TRADE DEFICIT, but do not ultimately determine it. That's unfair!

    The other TWO VERY IMPORTANT FACTORS – the capital account and the financial account ultimately determines the BOP or Balance of Payments that affect the overall economy, not just the Trade Deficit, but you left those out of the video entirely.

  8. I look at the trade war in this way
    1. US cuts tax first then uses tariffs to collect more money from working Americans. 2. Did America loose money by trading with the Chinese? No! American multinational companies make tons of money in China then send their products back to America. Those companies are not even 1% of the total American population. 3. The trade deficits don't represent the total trade volume between US and China, such as Apple takes 90% of the total profit of I Phone manufactured in China which was not included in the trade deficits. 4. The White House is pushing the numbers of tariffs to almost $400B so the Chinese can't match the number since the US exports is only around $100B. What is going to happen if the Chinese stops the Apple supply chain? Apple will end up like ZTE. 5. Trump forgets that China has a huge domestic consumption for most of the exports and a large markets in EU , Latin america plus the rest of the world.
    This is just my personal opinion since I'm just a carpenter live my life like 99% of all you Americans. Please reply with your thoughts.

  9. Very succinct video and I appreciate it while trying to navigate and understand the issue as a non-economist programmer. If we think of an ideal world, the video seems to make sense, with the US investing in building the internet/technology and providing services. The one thing that comes to mind is the aspect of IP theft in the real world though. According to https://www.stlouisfed.org/on-the-economy/2017/june/us-trade-deficit-driven-goods-services (and other sources) we are a net exporter of IP services, and this is an increasingly large aspect of the technology services going forward – as is implied in this video even. So if there is a level playing field and IP is able to be monetized and tracked without "cheating", then the physical goods trade deficit doesn't seem as big of a deal. But since the value of IP increases going forward in time, the physical goods trade deficit does seem to make a difference extrinsically as a means of providing negative feedback for that IP theft. This is in addition to the stonewalling of US businesses' entries into China (from my understanding). So it seems like the video may just be a little too succinct for such a complex issue. Still good perspective though IMO.

  10. Bloomberg Politics are (NOT)going to tell you the old Developed World and China is in a Demographic death spiral…

    Why is this Important????

    What is an Economy?? Goods and Services Consumed and Produced!!! Europe/East Asia /Russia/and Even Canada,have many more Boomers than Millennials in 2018…America has more Millennials in 2018…Europe for example 2019 forward will see their markets contract from 2020 forward,year after Year/decade after Decade…This is a mathematical certainty… America is Demographically Healthy,were going from the Largest consumer market to the Only Consumer market!! Think about it!!

    The Old Developed world and China are going to collapse,and All America has to do is protect our market and do what's in Our Interest!

  11. WASHINGTON — The U.S. trade deficit dropped in May to the lowest level in 19 months as U.S. exports rose to a record level. But the trade gap between the United States and China increased sharply, underscoring the economic tensions between the world's two biggest economies.

  12. The US missile destroyer Zumwalt and high tech destroyer of the British Royal Navy HMS Duncan have turned into useless tin cans due to China. Microchips made in China have put the vessels out of action. They had been installed on board. Before that the newest US destroyer had unexpectedly gone out of order while passing through the Panama Canal. And that had not been for the first time. First of all, there had been detected a leakage in propulsion. Then, being in Florida, the ship faced technical problems yet again. The Duncan destroyer, which costs 1.2bln dollars, got into the same situation during NATO’s manoeuvres. As it turned out, the Chinese ‘killer chips’ are to be blamed. Dozens of thousands of them were purchased by the US Navy.

  13. China robs the U.S. alone $400 billion every year through espionage… i believe a trade war is trump handling chinas espionage in the wrong way… really the united states and many other countrys should take china to United Nations court.

  14. china will just weaken the yuan to make things back where they were before the tariffs.

    chinese goods are just really better and cheaper that's why its really hard to compete against

  15. Next question: should you worry about US debt and budget deficits cause you’re gonna get licked by us sellout your debt.

  16. if there are comments with their own theories on the matter then you failed to address the subject matter properly. Whilst economics are in a large extent part of social sciences there are still answers which you can find. Educate the masses rather than making a 2 min video centralised around an opinion

  17. The trade deficits are not as much the issue as the fact that other countries like China restrict access to their economies through tariffs. China has also been accused of practice that allow them access to our intellectual properties and proprietary technology.

  18. We should definitely not be worried about deficits. Trump is an Economic Nationalist living in a globally liberalized world. Interdependence and comparative advantage is the path towards global equality and peace.

  19. The problem of losing manufacturing jobs in a long run will erode the economy foundation and country’s capability to compete with other nations. We need manufacturing economy as well as software and service economy

  20. A balance must be struck. Too be too dependent on any one leaves you vulnerable.
    If you only manufacturer like China then when tarifs and protectionism will hurt.
    But if you mostly consume from others, you don't make jobs for your citizens.
    Also military and security wise it is better.(people might try to microchip your stuff)

  21. If you build stuff and do other things also this gives both the educated and the non educated people of America jobs. Anyone who's such a snob that thinks we shouldn't take care of everyone within our borders who's trying to work is a total asshole.

  22. Terrible video from Bloomberg. It isn't about "stuff". It's about the value you add to something when you produce it. We can all make hamburgers with little value added or cars with lots of value added. Which job pays more? This was an awful way to explain why we are in a trade war.

  23. I’m Chinese,most Chinese don’t understand why rich USA against us ,they are far more rich than chinese,because chinese don't have election,and trump and most politician want target if they want to win the heart of poor people in USA,who became poor because of rich people in USA like TRUMP,if american people don't against other countries,they will against the rich people。

  24. The point is: China is not a free market, so you cannot sell things to China fluently. They will charge you for high tariffs and not letting foreign companies to enter Chinese market. More importantly, China uses the surplus to purchase US's valuable properties. So, see? China does not allow you to earn money and uses the money that it earned to buy your best properties.

  25. Balancing US trade deficits are long overdue. Stuff is tangible not symbolic. Stuff is what you hold in your hand; wear on your body; what you grow and eat; what you sleep on at night and what you drive on your roads. Stuff like ships; tanks and guns is what protects you when you sleep at night and protects you when you work and play during your days. Without this stuff and a U.S. workforce that has the knowledge to build it means you’ve delegated yourself as well as your children and their children from the “stuff building control” of knowledge; Skill-Sets, inventiveness; wealth and freedom that comes from it. Pay attention grasshopper and observe the ways of the working ant and ask yourself this: If trade deficits aren’t important than why are countries like China and Germany working so hard at keeping their trade surplus intact?

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