The Trade Deficit Is Not Made in America
For decades, American policymakers have been fed a simple story about trade: The United States runs persistent deficits because it doesn’t save enough. If only Americans were more frugal and the federal government controlled its spending, the trade deficit would shrink, and manufacturing jobs would return.
This is the argument Maurice Obstfeld made in an essay for the Financial Times yesterday, dismissing President Donald Trump’s latest tariffs as a misguided attempt to fix a problem that, in his view, can only be solved by cutting budget deficits and boosting national savings. But this standard economic narrative ignores one crucial fact: the U.S. trade deficit is not just a domestic issue—it is driven by foreign economic policies designed to suppress consumption abroad and flood the U.S. with excess savings.
Michael Pettis, a veteran China analyst, took to X Wednesday and dismantled Obstfeld’s argument by exposing its biggest blind spot: the assumption that only the U.S. has agency in global trade imbalances. In reality, China, Germany, Japan, and other surplus nations actively shape these imbalances through policies that suppress wages, limit domestic consumption, and push their excess savings into the global economy—where the United States, with its open capital markets, absorbs them.
The Real Cause of Trade Imbalances
Obstfeld argues that the U.S. runs a trade deficit simply because Americans spend more than they produce. But what he ignores is that foreign nations—especially China—deliberately engineer their economies to produce more than they consume. Beijing enforces high savings rates by suppressing wages, limiting household wealth, and directing cheap credit to state-owned enterprises rather than consumers. These excess savings don’t stay in China. Instead, they flow outward, seeking a destination.
There is one thing I find humorous about all the talks going around about tariffs.
Everybody is crying about how much more expensive items are going to be from automobiles to underwear.
I have not seen, heard or read from any news source be it local or national the following words : BUY AMERICAN , MADE IN AMERICA !!!!!
Walmart is the largest importer in the United States, and imports a significant amount from China. The U.S. imports many goods from China, including smartphones, computers, toys, and lithium-ion batteries.
Explanation
Goods imported from China
The U.S. imports many goods from China, including smartphones, computers, toys, and lithium-ion batteries.
Other imports from China
The U.S. also imports furniture, bedding, mattresses, small appliances, kitchen gadgets, and cooking tools.
Trade with China
In 2024, the U.S. imported $438.9 billion from China, and exported $143.5 billion to China.
U.S. dependence on China
The U.S. remains highly dependent on China for higher-value goods.
Other U.S. imports from China
Toys and games
Musical instruments
Timepieces
Paint
Sports equipment
Lamps
Miscellaneous manufactured items
The United States is the biggest importer of goods from Canada. In 2024, the U.S. imported billions of dollars worth of the following goods from Canada:
Mineral fuels, oils, and distillation products: $131 billion
Vehicles other than railway and tramway: $50.76 billion
Machinery, nuclear reactors, and boilers: $30.31 billion
Commodities not specified according to kind: $19.30 billion
Other top imports from Canada include:
Crude petroleum
Cars
Petroleum gas
Refined petroleum
Motor vehicles parts and accessories
The U.S. imports a wide range of goods from Canada, including:
Oils, minerals, lime, and cement
In 2021, the U.S. imported $105.3 billion worth of these commodities from Canada.
Wood, cork, paper, and printed books
In 2021, the U.S. imported $27.6 billion worth of these commodities from Canada.
Base metals, iron, steel, and tools
In 2021, the U.S. imported $33.3 billion worth of these commodities from Canada.
Canada’s top export destinations include the United States, China, the United Kingdom, Japan, and Mexico.
The United States is the largest trading partner of Mexico, and imports a wide variety of goods from Mexico, including machinery, vehicles, and agricultural products.
Top U.S. imports from Mexico:
Machinery and electrical products: This category includes televisions, smartphones, and household appliances.
Vehicles: This category includes cars, trucks, and auto parts.
Agricultural products: This category includes vegetables, fruit, beer, tequila, and other drinks and spirits.
Other top imports from Mexico:
Mineral fuels, such as crude oil, natural gas, and refined petroleum
Plastics, which are used to make packaging materials, building supplies, and more
Iron and steel, which are used in construction and infrastructure development
Optical, technical, and medical apparatus, such as surgical tools and precision instruments
The U.S. and Mexico are each other’s largest trading partner.
10:12 – As a Union member, I’ve been saying “Buy American” for over 40 years !!! Your job may depend on it.