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Trade deficits aren’t as bad as you think

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  • George Alessandria

Abstract

Although the amount of U.S. imports and exports has varied greatly over time, in recent years, the U.S. has been running trade deficits. Some people react to such trade deficits with doom and gloom; others cite them as evidence that foreign governments are not playing fair in U.S. markets; still others argue that deficits demonstrate that we are living beyond our means. In “Trade Deficits Aren’t as Bad as You Think,” George Alessandria offers an alternative view: Trade deficits have benefits. They shift worldwide production to its most productive locations, and they allow individuals to smooth out their consumption over the business cycle.

Suggested Citation

  • George Alessandria, 2007. "Trade deficits aren’t as bad as you think," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 1-10.
  • Handle: RePEc:fip:fedpbr:y:2007:i:q1:p:1-10
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    Keywords

    Trade;

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