United States Trade Deficit
As we have demonstrated, there are many harmful effects of a trade deficit:
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Our enormous trade deficit of $7.2 trillion is destroying our national wealth and dragging down our GDP.
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Americans jobs have been shipped overseas.
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The workers who have taken our jobs are often exploited.
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Other nations openly manipulate their currency to gain a competitive advantage.
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Foreigners have bought a huge amount of our assets and companies.
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We have allowed other nations to accumulate gigantic amounts of our debt, and our government is squandering these borrowed dollars away.
Then how in the world do some economists say that our trade deficit is no big deal?
They say: our dollars will always come back to America in one form or another. We are a large and powerful nation so there is no risk that foreigners will take control of our assets. The dollars that we borrow will be used in America too.
Milton Friedman believes trade deficit is no big deal:
They say: there is no direct correlation between a trade deficit and economic prosperity. Despite the fact that a trade deficit has a "drag" on GDP, there is no positive correlation between a trade deficit and an overall low GDP. This is because Americans demand more imports when the economy is growing.
They say: the jobs that were lost will be replaced with better higher paying jobs. The market, they claim, will balance it all out. Jobs lost to trade will be replaced by highly skilled positions in the service sector.
They say: the method of calculating the trade deficit is flawed. Calculating the trade deficit does not take into account that the profits from some of the products that are counted as imports (iPhones, Nike shoes, and Chrysler cars) actually belong to American companies. This benefits American stockholders, and our economy as a whole.
They say: the market will cure currency devaluations. The market, once again, will not allow an artificially low currency to persist. Once U.S. dollars flood a foreign market, the demand for the local currency will grow. This demand for the local currency causes its value to rise and foreign labor and products do not stay “cheap” relative to our own.