Here’s a letter to UVA Lawyer.
Editor:
In a recent speech at UVA Law, U.S. trade representative Jamieson Greer agreed with the notion that U.S. trade needs “rebalancing” (“U.S. Trade Representative Jamieson Greer ’07 Delivers VJIL Keynote,” Spring 2026).
This alleged need is mentioned much, as if it’s a fact as well established as are the laws of thermodynamics. Indeed, U.S. trade deficits are said to constitute a crisis that empowers the president to impose tariffs under Section 122 of the Trade Act of 1974.
Mr. Greer might be a fine lawyer; he was, after all, trained at UVA Law! But he’s apparently not so fine an economist. Every cent of U.S. trade deficits – more precisely, current-account deficits – is a cent of U.S. capital-account surpluses. That is, U.S. capital-account surpluses exactly balance U.S. current-account deficits, so there’s nothing economically that needs “rebalancing.”
And not only is U.S. trade not unbalanced, America’s decades-long streak of capital-account surpluses means that America is a net recipient of global capital. Investors from around the world have for decades placed, and continue to place, their bets on the U.S. economy. This net inflow of capital enriches not only foreign investors, but also us Americans by increasing the size and productivity of our capital stock, as well as by being a channel through which non-Americans’ entrepreneurial ideas are put to productive use in America.
The administration’s efforts to halt these capital inflows – which is what it means by ‘rebalancing’ trade – reflects a profound misunderstanding of economics and international commerce. If the administration succeeds, we Americans will pay a steep price.
Sincerely
Donald J. Boudreaux (UVA Law ’92)
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
