(Don Boudreaux) Tweet AIER president – and GMU Econ alum – Ed Stringham explains the folly of fretting about so-called “trade deficits.”
In a free market, a trade between any two entities occurs when each side believes it’s getting the better part of the deal. So if buyers in Gondwanaland buy widgets from sellers in Elbonia, it’s because the buyers in Gondwanaland value the widgets more than they value the money they’re paying, and the sellers in Elbonia value the money they’re getting more than the widgets they’re selling.
So from that perspective, there is no trade deficit. At worst, it’s an even trade.