Isn't the US trade deficit proof that our trade agreements aren't benefiting us?
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No. The reasons for our trade deficit are complex, and there is no clear way to connect these with
the benefits or fairness of our trade agreements. In fact, although some US producers seem to
see a trade deficit as bad news on our trade arrangements, consumers might have similar reasons for seeing it as good news (suggesting
that they have been able to buy more, cheap goods from foreign markets).
More importantly, however, there are two different international markets here that are working simultaneously: one for goods and the other for assets. A trade deficit can only exist if our net inflow of goods (a deficit in the balance of trade) is exactly matched by a outflow of assets (a surplus in the the balance of payments). Both of these have to be exactly offsetting, so if one is in surplus and one is in deficit, which is to blame? The reasoning could just as easily start in the asset market: foreigners find US investments highly attractive, and this increases the demand for dollars driving up the price of dollars. This in turn makes foreign goods appear cheap to US consumers and US goods expensive to foreign consumers. This will increase imports and decrease exports, causing a trade deficit -- but due to factors having nothing to do with our trade agreements. ~
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