STREAMING NOW: Watch Now

Is the US trade deficit a bad thing?

The U.S. has a $566 billion dollar trade deficit with the rest of the world. But does that hurt the economy? Christine Romans investigates.

Posted: Mar 15, 2018 11:36 AM
Updated: Mar 15, 2018 11:52 AM

President Trump falsely claimed the United States has a trade deficit with Canada, contradicting figures from his own administration.

Trump said the inaccurate statement on Wednesday at a fundraiser. The United States has a trade surplus with Canada, according to statistics from the Commerce Department, which is a part of the executive branch.

A deficit would mean the United States bought more goods and services from Canada than Canada bought from the US. Conversely, a surplus means that Canada bought more goods and services from the United States than the other way around.

A deficit or surplus does not mean one country took money from another country, as Trump often portrays the number.

Trump doubled down on the claim this morning, tweeting: "We do have a Trade Deficit with Canada, as we do with almost all countries (some of them massive). P.M. Justin Trudeau of Canada, a very good guy, doesn't like saying that Canada has a Surplus vs. the U.S.(negotiating), but they do...they almost all do...and that's how I know!"

The US had a $2.7 billion trade surplus with Canada last year. It also had surpluses with Canada in 2015 and 2016, according to the Commerce Department figures (Page 39, Exhibit 20).

Related: Major US trading partners blast Trump's tariffs

Here's how the 2017 trade deficit is calculated:.

The US had a deficit of $23.2 billion last year with Canada just in goods -- everything from toys to cars.

But the US had a surplus of $25.9 billion with Canada last year in services -- everything from tourism to technology to health care.

Subtract the goods deficit from the services surplus, and you get an overall US trade surplus of $2.7 billion with Canada.

Trump tends to only mention the goods deficit, which is misleading. The US economy today is much more driven by services: Hospitals, universities, tech companies, banks and so on. Manufacturing, an industry Trump focuses on, makes up about 10% of US economic output.

Globally, the United States has a trade deficit and that makes sense because the US economy is driven by consumer spending. Americans spending at stores and online make up about two-thirds of US economic activity.

Many economists say the trade deficit is not the right way to measure the fairness of trade deals, the trade balance or the health of the US economy. As the economy grew last year and unemployment fell, the trade deficit got bigger. During the financial crisis a decade ago, the trade deficit shrunk.

The United States can stomach such large trade deficits because foreign companies and governments take the money they get from US buyers and often reinvest that cash in US Treasury bonds. Although the US has a trade deficit, it still remains the top place for foreign investors to park their money. Those investments help to offset the trade deficit.

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 604687

Reported Deaths: 7643
CountyCasesDeaths
Hennepin1250161780
Ramsey52519898
Dakota46852471
Anoka42789458
Washington27436291
Stearns22561225
St. Louis18146313
Scott17553137
Wright16383149
Olmsted13406102
Sherburne1202795
Carver1067448
Clay826592
Rice8204110
Blue Earth762744
Crow Wing681895
Kandiyohi668185
Chisago620152
Otter Tail586284
Benton582998
Goodhue484074
Douglas475781
Mower470533
Winona461451
Itasca460163
Isanti440364
McLeod430961
Morrison424962
Beltrami407962
Nobles407750
Steele397816
Polk389072
Becker386755
Lyon363853
Carlton353056
Freeborn347133
Pine334923
Nicollet331345
Mille Lacs311854
Brown308040
Le Sueur297326
Cass286332
Todd285633
Meeker263543
Waseca238023
Martin235333
Roseau211221
Wabasha20793
Hubbard196641
Dodge18783
Renville182846
Redwood176539
Houston174616
Cottonwood167124
Wadena163423
Fillmore157610
Faribault155219
Chippewa154038
Pennington153820
Kanabec146828
Sibley146810
Aitkin138937
Watonwan13579
Rock128719
Jackson122812
Pipestone116726
Yellow Medicine115020
Pope11306
Murray107110
Swift106918
Koochiching95518
Stevens92411
Clearwater89016
Marshall88817
Lake83220
Wilkin83213
Lac qui Parle75622
Big Stone6044
Grant5948
Lincoln5853
Mahnomen5669
Norman5479
Kittson49022
Unassigned48393
Red Lake4017
Traverse3775
Lake of the Woods3453
Cook1720

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 371226

Reported Deaths: 6056
CountyCasesDeaths
Polk58274641
Linn21241339
Scott20311248
Black Hawk16180312
Woodbury15241230
Johnson1462285
Dubuque13515211
Dallas1129499
Pottawattamie11233174
Story1072048
Warren583891
Clinton561593
Cerro Gordo554196
Sioux517674
Webster516094
Muscatine4884106
Marshall487176
Des Moines467672
Wapello4337122
Buena Vista427040
Jasper421172
Plymouth403181
Lee382556
Marion366176
Jones301057
Henry294537
Bremer288761
Carroll287252
Boone268534
Crawford268340
Benton260355
Washington257551
Dickinson249344
Mahaska232751
Jackson225242
Clay216727
Kossuth216166
Tama212271
Delaware211143
Winneshiek198935
Page194522
Buchanan194133
Cedar192323
Hardin187544
Fayette186943
Wright186140
Hamilton182051
Harrison179973
Clayton171157
Butler166535
Madison164519
Mills163924
Floyd163542
Cherokee159338
Lyon158941
Poweshiek157136
Allamakee152852
Hancock150334
Iowa149724
Winnebago144531
Cass139255
Calhoun138813
Grundy137433
Emmet135841
Jefferson133335
Shelby131637
Sac130920
Union130035
Louisa129849
Appanoose129049
Mitchell126743
Chickasaw124917
Franklin123523
Guthrie123332
Humboldt119626
Palo Alto113523
Howard105022
Montgomery103638
Clarke101124
Keokuk96832
Monroe96431
Unassigned9550
Ida91635
Adair87432
Pocahontas85822
Davis85325
Monona83431
Osceola78917
Greene78011
Lucas77923
Worth7628
Taylor66812
Fremont6279
Decatur6169
Ringgold56424
Van Buren56418
Wayne54423
Audubon53411
Adams3444
Rochester
Clear
84° wxIcon
Hi: 85° Lo: 57°
Feels Like: 84°
Mason City
Partly Cloudy
86° wxIcon
Hi: 87° Lo: 61°
Feels Like: 88°
Albert Lea
Partly Cloudy
86° wxIcon
Hi: 86° Lo: 59°
Feels Like: 87°
Austin
Partly Cloudy
84° wxIcon
Hi: 86° Lo: 59°
Feels Like: 86°
Charles City
Partly Cloudy
82° wxIcon
Hi: 84° Lo: 61°
Feels Like: 85°
Showers and storms possible Thursday through Saturday
KIMT Radar
KIMT Eye in the sky

Latest Video

Image

Aaron's Evening Forecast (6/23/21)

Image

Summer travel guidance as the pandemic winds down

Image

Lions Avenue of Flags Program

Image

Biker advocacy group talks about safety following crash

Image

Mason City Housing Survey

Image

Biodiversity effort

Image

New addition to Ronald McDonald House Plaza

Image

Seans Weather 6/23

Image

Fewer students are going into the education field

Image

Return of Rochesterfest particularly sweet for local food vendors

Community Events