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Data: U.S. Census Bureau; Chart: Andrew Witherspoon/Axios

The United States' trade deficit with China is by far the biggest of any country and is a central reason for the ongoing trade war.

The big picture: President Trump is obsessed with the trade deficit — it's often the only number he requests and the only number he mentions. But the vast majority of economists agree the number is a misleading indicator of whether the U.S. is getting the better of any trade deal.

Three big reasons why economists say deficits don't matter...

  1. Trade balances are dictated by macroeconomic factors — namely how much a given country saves versus invests — rather than trade policy. So trade experts say there's no point in using deficits as a scorecard.
    1. Americans are big spenders, while the Chinese and the Germans save.
  2. China's economy is experiencing export-led growth, while the U.S. has a consumer-driven economy. There's surging consumer demand for exports in the U.S., so the country has trade deficits with exporting nations.
  3. The U.S. is an attractive investment destination for countries all over the world, and that also piles onto trade deficits.

The other side ... Trump isn't alone. Jared Bernstein, who was chief economic adviser to Vice President Joe Biden, and Dean Baker, co-founder of the Center for Economic and Policy Research, wrote for The Atlantic just after Trump's election, in "Why Trade Deficits Matter":

  • "Trade deficits, even in times of strong growth, have negative, concentrated impacts on the quantity and quality of jobs in parts of the country where manufacturing employment diminishes."

Be smart: The Wall Street Journal's Greg Ip, reflecting mainstream economists and journalists, writes that trade deficits are an oversimplified and "deeply flawed gauge of trade behavior that could lead the U.S. to pick the wrong fights."

Original story... By the numbers: Cracking the U.S.'s massive trade deficits

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