A trade deficit is defined as the amount by which the value of a country’s imports exceeds the value of its exports. It’s a metric that U.S. President Donald Trump frequently refers to when explaining or tweeting about his positions on trade, whether referring to NAFTA, China, or the new tariffs on steel and aluminum.
Breaking the definition down beyond imports and exports, a country’s trade balance is a reflection of production versus consumption, explains Joseph Glauber, former chief economist for the U.S. Department of Agriculture.
“If you’re consuming more, you’re going to be importing,” he says, in the interview below. “I think that’s what is missed by some in the administration. By preventing imports, someone is going to have to pay the cost of that, and who pays the cost? It’s consumers.”
In other situations, a trade deficit can be reduced by limiting consumption or imports, but there’s no guarantee those actions will boost domestic production.
“I think it’s a misguided measure,” Glauber continues, in the interview below. “Most economists I know would dismiss it right out of hand as being any sort of reliable metric to tell you anything about the economy, other than to tell you you’re consuming more than you produced.”
Glauber served as the head economist for the USDA from 2008 to 2014. Prior to that, he was the chief agricultural negotiator for the U.S. Trade Representative in the World Trade Organization Doha talks. Glauber is now a senior research fellow with the International Food Policy Research Institute, and was recently named by Canadian Agriculture Minister Lawrence MacAulay to a panel tasked with providing input into the review of Canadian business risk management (BRM) programs for agriculture.
Following a presentation on NAFTA at the Western Canadian Wheat Growers convention in Washington, DC, last week, Glauber discussed his outlook for NAFTA negotiations, the possibility of the U.S. re-entering the Trans-Pacific Partnership, the focus on trade deficits, and whether he has any initial comments on Canadian BRM programs: