Kellogg Faculty Fellow Robert Johnson was recently featured in an article in Marketplace examining the benefit of the current trade deficit which is the widest it’s ever been.
Although the current administration has criticized the trade deficit and promised to narrow the trade gap through tariffs, Johnson argues that the gap between imports and exports may actually be beneficial.
He says that there is no way to truly close this gap, as the United States does not have enough exports to make up for their imports, but we do have financial assets that foreign investors want to buy. Because of this, “foreigners want to pour money into the United States, in safe assets in the United States. And that has made it very easy for us to borrow from abroad.”
Other experts in the article warn that if the United States were to eliminate the trade deficit, the tradeoff would be less foreign investment, causing us to lose a critical source of funding.
Johnson is an associate professor of economics whose work encompasses international trade, macroeconomics, and economic growth.