Misconceptions about US trade deficits muddy the economic policy debate

The distrust of openness to the global economy shared by Republican and Democratic leadership derives in part from a faulty premise that persistent US trade deficits have been imposed on the United States by foreign countries and have contributed significantly to US deindustrialization. In fact, the deficits have important domestic sources, and the main drivers of US manufacturing employment decline lie elsewhere. Two theories that blame foreign countries for deficits hold that deficits arose from unfair competition by trade partners or from a “global savings glut.” The author says the first…