For further context, 60 percent of the U.S. trade deficit is with China ($347 billion).
Trade deficits often don’t tell us much about the overall health of our economy.
The same inverse relationship exists between unemployment and trade deficits, the senator added. From 1992 to 2001, as the trade deficit grew, unemployment declined. And when the deficit diminished in 2009, unemployment skyrocketed. Since then, Toomey said, unemployment has declined while the trade deficit has leveled off.
Rising living standards depend on rising productivity, which in turn depends on innovation, workers skills, and capital investment. Trade deficits had no adverse effects on these dynamics.
The analogy is an individual has a wage surplus with his/her employer, but doesn’t buy anything from the employer. The same person has a trade deficit with the grocery store, but doesn’t sell anything to the store to balance the relationship.
If you worry about trade deficits then you must assume that when imports are purchased, the dollars never come back. But they do come back as investments in the United States, so that’s the folly about worrying about trade deficits.