Trade Deficits – Should We Really Worry if a Country Imports More Than It Exports?

Santiago Bel
September 7, 2025

Sometimes the term “trade deficit” doesn’t sit well with some people. Sometimes it gets painted as something bad, as if the U.S. is falling behind other countries in trade or productivity, or as if we are becoming overly reliant on others to produce what we use and it’s becoming one of our biggest weaknesses. However, a trade deficit isn’t always bad. Sometimes, it mean’s the opposite. To understand the term and its implications deeper, we need to exame the factors behind a trade deficit.

Trade deficits happen when a country imports more than it exports. For example, if every year the United States buys $3 billion worth of foreign imports but only sells $2.5 billion worth of goods and services abroad, the U.S. is running a half a billion dollar trade deficit. Although it may look like a loss, trade deficits don’t work like household budgets. According to Trading Economics, the U.S.’s trade deficit in August was over $60B. There are reasons behind why a situation like this is a gain rather than a loss.

When a country conducts trade, the goal is for both sides to benefit. For example, the U.S. doesn’t import goods such as iPhones, cars, and clothes because we are incapable of producing them, but because it is more efficient and cheap to have them imported, many times at the expense of poorly-paid workers abroad. However, due to our ability to export these goods, the country can focus on industries where we have the comparative advantage. Comparative advantage is the ability to produce a good or service more efficiently, or at a lower opportunity cost (discussed in a previous post) than others. Some of the industries the U.S. focuses on are research, development, and design in technology and innovation, services such as finance, healthcare, education, legal services, and entertainment, advanced manufacturing, and even agriculture and natural resources. 

However, lasting trade gaps can raise worries, especially in how they can build up debt. When a nation imports a significant amount more than it exports, it needs to find funds, often through loans or by liquidating assets such as property or investments, which can cause economic weakness. In the U.S. for example, some of the spending gap is covered by offering Treasury bonds purchases overseas, including buyers from China and Japan where we import many products from. However, this only works if foreigners trust in the U.S. dollar and in our economy. In times of trouble, the nation may deal with a declining currency, consequently leading to increased borrowing costs, and the trade gap becoming more expensive. 

However, it’s important to not just focus on the gap itself, but rather on what the economy is actually doing. For example, if a nation is in debt due to investments in useful businesses or public works, its future is going to be a lot more financially stable than the nation in debt who simply borrows to fuel spendring sprees or to support inflated budgets.

Another point to consider in the U.S. is where our trade deficit grew from. In the late nineties and early two thousands many U.S. plants shut down because companies began producing goods in cheaper places, such as China, Vietnam and Mexico. When factories in the U.S declined, the places relying on their products suffered. This led to nationwide shifts in U.S. jobs, lives, towns, and opinions. 

Political arguments often miss the point. Focusing on things like shrinking trade gaps might backfire, creating more problems instead of solving them. Trade limits such as tariffs on imports or limits on how many foreign goods can come into a nation may lower foreign reliance, but could also mena higher costs for shoppers, damage businesses, and restrict economic expansion, especially when the main goal of resitricting imports is to strengthen the domestic economy. Instead, we should continue trying to macimize how much people save at home by improving how the government manages money, lowering debt while fostering solid business growth. Essentially, instead of trying to correct a trade gap, nations need to address what causes any issues that may arise from one initially.

Trade isn’t about winners or losers; instead, nations exchange goods because doing so benefits everyone involved. It should be a win-win situation. Instead of focusing on deficits or surplus, we should focusin on building lasting stability and well-being for all.