Trade gap a sign of weakness? Maybe not

WASHINGTON — President Donald Trump ripped into one of his favorite targets Thursday in Beijing: The United States’ “shockingly” large trade deficit with China.

“I blame past administrations,” Trump declared, “for allowing this out-ofcontrol deficit to take place and grow.”

America’s lopsided trade relationship with China and with the rest of the world is a familiar theme for Trump and his economic team. They’ve branded trade deficits a mark of economic weakness — even shame — that depress growth and kill jobs.

Yet most economists say their ire is misplaced. They reject the notion that trade is a zero-sum game in which victory goes to the countries that run a trade surplus by exporting more than they import.

“Focusing on the trade deficit as a sign of weakness is fundamentally flawed,” says Bryan Riley, a trade analyst at the conservative Heritage Foundation. “If you look over history, there is no correlation between trade deficits and weak economy.”

In fact, a swollen trade gap — which shows how much the value of imports exceeds the value of exports — can reflect economic might: When times are good, after all, consumers feel more prosperous and confident enough to spend freely — on imported goods as well as on home-grown goods.

Consider what happened in 2006, the year before the Great Recession began. The economy grew at a solid 2.7 percent. Yet that same year, the United States posted a record-high trade deficit: $762 billion.

By 2009, in the depths of the recession, the trade deficit had actually shrunk to $384 billion. The main reason: Fearful American consumers had reduced their spending on imports — and everything else.

Or look at Japan. That nation has long run trade surpluses even though its economy has lain stagnant for much of the past quarter-century.