Economic Perspective: A Widening Trade Deficit

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MARY WALDEN:

“Today’s program looks at a widening trade deficit. Mike, the trade deficit, which measures the difference between the value of products and services imports against the value of products and services our nation exports, widened last year. Why did this happen?”

MIKE WALDEN:

“Of course the trade deficit has been in the news. The Trump administration has focused on wanting to reduce that trade deficit, but it doesn’t look like that has happened thus yet. I think it’s important, when we look at the U.S. trade deficit to divide it into three parts: the deficit in oil, the deficit in services and the deficit in goods, hard goods if I will.”

“Great news on the deficit in oil. That used to be one of the biggest problems creating our trade deficit in past decades. No longer. We are virtually at zero trade deficit regarding oil. We import some oil, yes, but we are also now exporting oil, and right now that is almost a wash. Very, very little trade deficit there, and that’s a big, big change from several decades ago.”

“The trade and services has actually been a big plus for the U.S. in world trade for decades, and in fact, in just the last couple of years that trade surplus and services actually doubled. So we’re very good at selling services, and this could be things like architectural services, construction services, literary services, et cetera. We’re very good at competing on the world stage in terms of our services.”

“Where we fall down is in our trade deficit for goods. We import a lot of goods: electronic goods, furniture goods, clothing goods, et cetera. And that’s actually been going up as the economy has recovered. So if we want to reduce the trade deficit the focus needs to be on reducing the deficit in tradable goods.”