Trade and Trade Deficits are not Related, Really!

Since the beginning of the 2016 presidential election cycle, President Trump has repeatedly argued that trade deficits with other nations are indicative of unfair trade. His contention is that if we just negotiate better trade deals, deficits would disappear, and economic growth and employment would improve. Regrettably, this view is simplistic; usually deeper economic forces are at work, making trade deficit reduction more difficult. That said, pushing nations with chronically large trade surpluses to reduce them would be good because large trade surpluses are economically destabilizing.