Trade Deficit: Made in the USA?

Bryan Riley / May 11, 2011

The U.S. Bureau of Economic Analysis just announced that the trade deficit for March increased to $48.2 billion.

The federal budget deficit plays a major role in creating U.S. trade deficits. When the government sells Treasury bonds to finance the budget deficit, it competes with U.S. exporters and private borrowers for scarce foreign dollars.

For example, in January the federal government borrowed $46.483 billion from abroad, and the United States ran a trade deficit of $46.969 billion.

Trade deficits are not necessarily a cause for concern. But in this case, they are a symptom of the real problem: massive government budget deficits.