CMV: Trump Misunderstands Trade Deficits and It’s Hurting Americans
Trump repeatedly claims that a trade deficit means the U.S. is “losing” money to other countries. This is fundamentally incorrect. A trade deficit is not government debt—it simply means a country imports more than it exports. In reality, trade deficits can be a sign of economic strength, and Trump’s misunderstanding of this basic concept has led to misguided trade policies that hurt both American businesses and consumers.
1. A Trade Deficit is Not Like Owing Money
The U.S. trade deficit means Americans buy more goods from other countries than they sell abroad. But that doesn’t mean money is just disappearing. Foreign countries use their U.S. dollars to invest back into the American economy, whether through purchasing U.S. stocks, bonds, or real estate. The U.S. benefits from a trade deficit because it gets cheap imports, which lower costs for consumers and businesses.
2. The U.S. Trade Deficit is Largely a Result of American Economic Strength
The U.S. has a massive trade deficit in goods, but a surplus in services (like finance and technology). Americans have more disposable income than many other countries, so they buy more imports—that’s a sign of consumer power, not weakness. A strong U.S. dollar makes imports cheaper, which naturally contributes to the trade deficit.
3. Trump’s Tariffs Backfired and Proves he Doesn’t Understand Trade
Trump’s tariffs on China didn’t reduce the trade deficit—they actually made goods more expensive for Americans. Instead of fixing the deficit, Trump’s policies led to retaliatory tariffs, which hurt American farmers and manufacturers. The damage was so severe that Trump had to approve a $28 billion bailout for farmers during his first term to offset their losses. If his trade policies were actually working, why did U.S. farmers need a government bailout? The trade deficit with China remained high because businesses just shifted supply chains to other countries like Vietnam and Mexico. The U.S. International Trade Commission reported in 2021 that tariffs raised prices between 1.7% and 7.1% in the ten most affected sectors, including apparel, car parts, furniture, and computer equipment. These findings are one of the many studies that indicate tariffs often result in increased costs for consumers, as importers and retailers adjust prices to offset the additional expenses.
4. If Canada Stopped Exporting Oil, It Would Run a Trade Deficit With the U.S.
Trump loves to complain about the U.S. trade deficit with Canada, but he ignores that it’s largely because Canada exports massive amounts of oil and raw materials to the U.S. If Canada stopped exporting oil, it would run a trade deficit with the U.S. because it imports more U.S. manufactured goods than it sells back in other sectors. Said raw materials and crude oil are then refined and manufactured into higher-value products by American companies, who sell them for a profit. This means the U.S. isn’t just “losing” money to Canada—it’s leveraging Canada’s exports to fuel its own industries. Trade deficits don’t mean one country is “winning” and another is “losing”—they’re just a reflection of what different economies specialize in.
5. Tariffs Won’t Magically Bring Manufacturing Back to the U.S.
Trump claims tariffs will force companies to bring manufacturing back to America, but businesses don’t make major investment decisions based on short-term policies. It takes years—and billions of dollars—to build factories, train workers, and establish supply chains. Many companies would rather wait out the tariffs than gamble on a costly move that could be undone by the next administration. Even if some industries moved production back, higher labor and material costs (especially with tariffs on cheap raw materials) would lead to more expensive goods for consumers.
Trump sees trade as a zero-sum game where the U.S. “loses” if it imports more than it exports. However, that’s not how trade works. Trade deficits can actually be beneficial, and Trump’s ignorance on this issue has led to harmful policies that hurt American workers, businesses, and consumers.