What is the whole U.S. trade deficit with China about? Do we really owe them $202,000,000,000?

Answer 1

No. A trade deficit with a country does NOT mean that we owe them anything. It simply means that we bought more goods from them they bought from us during some period of time. But that's the point -- we already bought those imports, we already exchanged money for those goods ... we don't still owe a debt for them. A trade deficit does NOT imply debt.

You run a trade deficit with the grocery store, because you buy food from them, but they don't buy anything from you, right? That's a trade deficit. But that does not mean that you owe them a debt at the end of the month. You don't, because you exchanged cash for those goods when you went to the store. It's an equal exchange: you give them $20 and they give you $20 worth of food. No one owes anyone anything, but that is still an example of a trade deficit.

In the case of China, Americans import lots of things made by cheap labor in China -- that makes our economy more productive. Things are therefore cheaper for Americans, and then Americans have extra cash left over to buy other things in addition and satisfy additional desires and needs.

But because the Chinese people are very poor compared to Americans, there are not a whole lot of things they could afford to buy that Americans export. Therefore the US imports more from China than vice versa; but that in itself does not cause any debt accumulation.

Answer 2

Yes we do.... the Current Account is in deficit and most of its financing comes from China.

Answer 3

If we do, it's Bush's fault! Clinton gave them 2 billion in 1998 to keep their economy from collapsing.

Answer 4

yea.. Kevin is the only person to answer so far that has a clue what they are talking about, he got it exactly right.

The rest is pretty shocking.

Answer 5

Oh well they can just put that in my bank account

Answer 6

where was your computer made?