Celebrating a Half-Century of U.S. Trade ‘Deficits’

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In the Washington Post, GMU Econ alum Mark Perry and I document this fact that should eliminate the anxiety of those who fear so-called “trade deficits”:

For every $100 billion increase in the trade deficit since 1975, U.S. household wealth has increased by an average of $76,000. In fact, inflation-adjusted average household net worth has climbed from $336,508 in 1975 to more than $1 million today. Household net worth is also 140 percent higher than it was when the North American Free Trade Agreement took effect in 1994, and 70 percent higher than when China joined the World Trade Organization in 2001.

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Fifty years of trade deficits have not drained the United States of wealth or mortgaged its future to foreigners. Rather, by bringing trillions of dollars of foreign investment capital to the nation’s shores, they have enriched it. That’s an economic outcome to celebrate, not one to condemn or correct.