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In The Media
Expert: U.S. Trade Deficit is a Matter of High Household Spending
Some analysts say a major and direct cause of the imbalance in bilateral trade is the high level of expenditure by American consumers.
Published on Jul 27, 2018
Source: CGTN
The US has been crying that it “losing on trade” and has ignited a trade war globally. But are other countries to blame?
Some analysts say a major and direct cause of the imbalance in bilateral trade is the high level of expenditure by American consumers and their government, who tend to spend most, if not more than, what they earn.
Yukon Huang, a senior fellow at the Carnegie Endowment for International Peace, pointed to the low savings rate in the US, as well as the large budget deficit the government runs, as an explanation for why the US has had a trade deficit. "This was the case whether China is a major power, whether the economy is doing well or badly. Whether US economy is growing or not growing strongly. Trade deficit is determined by savings rate,” said Huang.
Besides China, the United States also operates a large deficit with many other trading partners, among them France, Germany, Italy, Canada, Mexico, Japan and South Korea.
The experts say that if the US reduced its trade deficit with China, it would increase its deficit with other countries, since the demand is there.
“The mistake is fewer products coming from China, America will import from other countries. It could be Singapore; it could be Bangladesh, Europe, or Australia. America’s overall trade deficit will not fall at all. It appears who will be responsible for the change, would it be South Korea’s problem, the Australia’s problem, or Germany problem or India problem. That’s why the solution really lies within US itself,” Huang noted.
About the Authors
Ming Tian
Yukon Huang
Senior Fellow, Asia Program
Huang is a senior fellow in the Carnegie Asia Program where his research focuses on China’s economy and its regional and global impact.
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
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