Deficit Dollars

In 2016, the US trade deficit hit $502 billion, its highest level in four years. In percentage terms, it fell to 2.7% of GDP, down slightly from 2.8% the last few years. By definition, the size of the trade deficit is equal to the gap between domestic savings and domestic investment. Thus, only by fundamentally altering domestic savings and investment decisions by households and firms can the deficit be reduced.