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> The formula simply reflects the premise that, in a fair system, trade deficits would average out to zero.

I don't see why you would expect that.

Consider a rich country that mostly exports expensive manufactured technological things. It imports one of the natural resources it needs for this from some poor country that is mostly poor farmers and the poor laborers who extract that natural resource they export.

Its hard to see a way for the rich country to not have a trade deficit with the poor county. Even with what the poor country makes from exporting their natural resources they are unlikely to be able to afford the items the rich country makes.

Or consider two countries that are both rich and have about the same population but have different tastes. Say in country X 90% of the population likes big SUVs and trucks and only 10% like small cars. In country Y it is 90% who like small cars and only 10% like the big ones.

A car maker that has factories in both countries could find it more efficient to have an SUV/truck factory in X that makes the trucks for both countries and a small car factory in Y that makes the small cars for both countries than to have both an SUV/truck and a car factory in each country.

But since the big SUVs and trucks cost more than the small cars Y is going to have a trade deficit in cars with X.

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rayiner a day ago | parent [-]

Okay, that's a nice econ textbook hypo that explains the trade deficit with Bangladesh. But why do we have huge structural deficits with the EU, Japan, China, etc? Those are big, diversified economies. You'd think those factors would average out.

Germany is a big, rich economy. How do they manage to run large trade surpluses? They seem to do this quite deliberately. So why is it a bad idea to try and make our economy more like Germany’s? Japan has a large trade surplus. The EU as a whole is basically evenly balanced, tending towards a small surplus. Are our Reaganite overlords smarter than the guys who run those countries?

	▲	tzs a day ago \| parent [-]
		Cars is a big part of it with Japan. I'd expect that even if all other things were equal Japanese consumers would prefer Japanese cars for the same reason a lot of American consumers prefer Japanese cars: companies like Toyota and Honda are really really good at cars. I've got way more confidence that I can buy a newly released revision of a Honda and get a car that won't be a lemon and that I can keep running well for 20+ years if I wish with reasonable maintenance than I do for American car companies. It's not an American worker vs Japanese worker thing. 70% of Hondas and 100% of Acuras sold in the US are built domestically and for the models that are made in both countries there is no significant difference in quality. The American companies have been improving, to the point that when I decide to replace my nearly 20 year old (and still running great) Honda CR-V the Chevy Equinox EV will be a contender. The new Chevy Bolt will probably be a contender too, especially if they get it out before the federal tax credits go away. 10 years ago this would have not been the case. Another part of it is the dollar is stronger than the yen. Japan has been accused of trying to keep the yen low but even if they are and they stopped it still will probably be weaker than the dollar. The strong dollar isn't just a factor in trade with Japan. The dollar being the global reserve currency makes that a factor with nearly everyone else. For agriculture and food products a lot of countries have stricter health and safety regulations. If an American company needs to put in extra work to make their exported products meet those standards that can make them more expensive and cut demand. The foreign food companies on the other hand are already making their products to meet their stricter domestic standard so it is no extra work to meet US standards.