Analysis: Clear thinking about tariffs and the trade deficit

KEY POINTS

Distorted messages include the idea that tariffs are not taxes, are paid for by foreign countries rather than predominantly by U.S. businesses and households, and that trade deficits arise from being “taken advantage of” by other countries.

In a world with roughly 200 countries, there is no reason to believe that bilateral transactions would be balanced. A household isn’t being ripped off by their dentist or the local supermarket because they run a persistent deficit with them.

The trade deficit isn’t a measure of how much other countries are ripping us off; it is how much the U.S., as a whole, is borrowing from the rest of the world each year. And a big part of the reason why the U.S. runs a trade deficit is, far from a sign of weakness, because the U.S. has long been seen a