I don’t write or talk much about trade but it is, obviously, an important part of the global economy. With all the talk of deglobalization, you’d think that the US trade deficit must be shrinking, right?

And with all those tariffs, imports must be falling right?

Well, okay but the US doesn’t make anything anymore and our trade policies have ticked off all our trading partners so exports must be terrible, right?

I know some of you are thinking, well, he only showed the last year and that must be some kind of anomaly. Or maybe if we adjust for inflation we get a different result. Yeah, no.

Trade deficit adjusted for inflation. Updated through Q1 24:

The trade deficit and the more comprehensive current account deficit can’t be “fixed” with tariffs because they are rooted in our budget deficit. They do affect trade in one way though. Foreign countries buy our goods because in a lot of cases they are the best or the only option in the world. But they don’t have to use our services.

Real Exports of goods through Q1 24

Real Exports of Services through Q1 24 are still below pre-COVID levels.

A lot of people want you to believe, for political purposes, that trade is bad for the US but trade is a reflection of our strengths. The trade deficit is a reflection of our weaknesses, mainly that our politicians, of both parties, are unwilling to live within our means.

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