Trade conflict does not eliminate US current account deficit

Analysis - September 2019 - No. 18

Authors Aurup, Jens Vedelsdal; Damgaard, Jannick; Petry, Mette Kanstrup
Subject International Economy; Balance of payments! foreign trade and external debt
Type Analysis
Year 2019
Published 18 September 2019
The US has a current account deficit and president Donald Trump has an explicit goal of reducing it. However, new trade agreements and new tariffs do not remove the deficit, as the current account is basically determined by the balance between total savings and investments in the US. The growing public budget deficit, on the other hand, tends to increase the US deficit, but a large international demand for dollars helps keeping costs down.