4/06/2018

So why is the US Trade Deficit going up?

From CNBC:
The U.S. trade deficit increased to a near 9½-year high in February as both exports and imports rose to record highs . . . . 
The Commerce Department said on Thursday the trade gap rose 1.6 percent to $57.6 billion. That was the highest level since October 2008 and followed a slightly downwardly revised $56.7 billion shortfall in January. . . .
The recent tax cuts that have made the US a much more attractive place to invest, causing us to run more of a surplus in the capital account (the account that looks at trading of assets between countries).  As the US becomes a more attractive place to invest, more money is invested in the US relative to other countries.  But that means, if the exchange rate is to remain constant, they will have to run a deficit in the combined goods and services accounts. 


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