Yes, Trade Deficits are hurting American manufacturing

America’s current trade deficit is almost incomprehensible in size, and is largely a misunderstood economic concept. However, here are some basic facts to consider:

  1. Trade deficits are not a simple accounting convention; they are real debt that must be paid back
  2. Trade deficits must be financed, and we finance our trade deficit by borrowing from our trading partners.
  3. The big irony is that we borrow money from our trading partners to finance our trade deficit so that we can buy more of their exports.
  4. When the value for the dollar is increased, our exports become less competitive and imports cheaper.
  5. Contrary to popular belief, the trade deficit debt must be paid back, and this will be increasingly hard to do with growing federal deficits.
  6. If we get crosswise with China, they may decide to not loan us any more money and cash in their US securities.

Read the rest of Collins’ piece on Industry Week’s newsite.