Deficits and Debts
I know, I’m not supposed to use profanity, and particularly in the title. But here’s my problem: either President Trump thinks we are all dumbasses, or he is a dumbass. I’ll let you determine which is right at the end of this essay.
There are two kinds of deficits, and one kind of national debt. The National Deficit is simple to explain (tough to fix). It’s how much more the US Government spends than it brings in. That’s not so hard to understand. If your personal income is $100,000 a year, and you spend $110,000 in a year, you’re running a deficit. The extra $10,000 is money you’ve borrowed to spend; on a credit card, or a bank loan, or borrowing from family and friends.
The Government does the same thing. They borrow to cover the costs of spending more than they bring in. This year the US Government is spending about $7.5 Trillion, and bringing in $5.4 Trillion. That leaves a $2.1 Trillion deficit. The US Treasury sells bonds and other forms of that kind of debt to private and foreign investors to cover the difference.
Add all the years and all the annual deficits up, and the United States owes a national debt of over $40 Trillion. The Government pays a substantial sum of interest on that debt, about $1 Trillion in 2025.
We’ve covered the annual national deficit, and the total national debt. Neither of those have much to do with international trade. But somehow, President Trump conflates an entirely different kind of deficit with the government deficit.
More Money to Spend
Trade deficit is a pretty simple concept to understand as well. If the Canadians, for example, buy $225 Billion worth of goods and products from American manufacturers, and sell $120 Billion to American consumers, then Canada is running a $105 Billion trade deficit. More Canadian money is flowing to American producers then American money flowing to Canadian producers.
In 2025 the United States exported $3.43 Trillion in goods and services, and imported $4.35 Trillion. That means that the US ran a $920 Billion trade deficit. Now there’s nothing inherently bad about a trade deficit. But long term trade deficits often means fewer jobs in production, more foreign ownership of US assets, and dependence on other nations for certain goods. On the other hand, trade deficits also mean that there’s more money that people can spend on goods in the United States than in other countries.
In other words, a trade deficit can be good, or it can be bad. Reasonably if it’s a narrow difference it’s really not that big a deal, particularly in our current world where trade is highly interrelated. Regardless that the MAGA-Republicans want the economy of the 1890’s, today we depend on foreign manufacturing, foreign resources and foreign finances. And the world depends on us as well.
Service Economy
Today, 17% of the American economy is based in production. The rest is in the “service” side of our economy. When Trump says he wants more manufacturing jobs “back in America”, what he saying is that if more “stuff” was made here, the trade deficit would be reduced. But the reason so much manufacturing is done outside of the United States is that the cost of making things is so much cheaper in other parts of the world. Nike out-sources its shoe manufacturing to Vietnam, China, and Indonesia. Levi-Strauss makes it blue jeans in China, Bangladesh, Vietnam and India. Apple produces I Phones in China, India and Brazil.
If you see a problem, it’s that the United States is deeply dependent on Chinese manufacturing. We may not like the “CHINESE COMMUNIST PARTY”, but we sure like those factories in Tianjin, Guangzhou (old Canton), Qingdao (old Tsingtao), Ningbo (old Ming Zhou), Hong Kong, Shenzhen, and Shanghai.
In 2024, trade between China and the United States totaled $582.5 Billion, with a $295.5 Billion US trade deficit.
Raising Taxes
Do we depend on China for a lot of our manufactured goods? We absolutely do. Does China depend on US money to employ huge numbers of their even huger (is that a word?) population? They absolutely do, too. So far, it’s a good balance: they make a lot of our goods, and we pay them to do it.
President Trump is bound and determined to reduce the trade deficit by charging tariffs, that’s taxes, on foreign goods. Those taxes bring money to the “American side” of the trade equation. But it’s important to remember where that money comes from. The newest IPhone, the 18 Pro, costs $1199. That’s $100 more than the IPhone 17 cost. A good portion of that increase is from tariffs (though Apple won’t admit it). And who’s paying that tax, that cost? The American consumer, even though that tax is going into the coffers of the United States Treasury Department.
So when President Trump in North Carolina last night, said he wants to reduce the trade “deficit” by raising tariffs, what he’s really saying is that he wants to increase the amount of taxes Americans will pay for goods manufactured in foreign countries. And since so many of our goods are manufactured “overseas”, he’s really saying to us: “Pay More Taxes”.
If Americans go along with that, I guess we could say in the end: we are the dumbasses.
