Does Addressing Bilateral Trade Imbalances Work?
Even if China opened its markets fully to US goods and services, the total US trade deficit would not change. But focusing on imbalances with individual countries can nonetheless lead to desirable policy changes, as the Trump administration's approach to China has shown.
CAMBRIDGE – Politicians and economists view trade imbalances very differently. Consider the United States’ trade deficit. Economists emphasize that the total US trade deficit with the rest of the world is the result of policies and actions at home. Simply put, if the US invests more than the country as a whole saves, it must import the difference from the rest of the world, creating the existing trade deficit.
CAMBRIDGE – Politicians and economists view trade imbalances very differently. Consider the United States’ trade deficit. Economists emphasize that the total US trade deficit with the rest of the world is the result of policies and actions at home. Simply put, if the US invests more than the country as a whole saves, it must import the difference from the rest of the world, creating the existing trade deficit.