11 Feb 2022

US Trade Deficit Hits Record, Reflecting Strong Economic Growth - Interview with WTI Managing Director Prof. Joseph Francois

In this interview with Voice of America (VOA), Prof. Francois shared his thoughts on the state of the US economy and its trade deficit.

Sneak peek:

Although a trade deficit is often cast in negative terms, economists usually see it as a sign of economic strength, indicating a net flow of investment into the country.

"Whenever the U.S. economy is doing well, the deficit gets worse," Joseph Francois, an economist and the managing director of the World Trade Institute at the University of Bern, Switzerland, told VOA.

A strong U.S. economy attracts foreign investment, helping to create new jobs and driving up consumption, much of which is targeted at goods manufactured overseas, Francois said.

"You've got more investment coming in, because people want to put more money in the U.S. economy when it's doing better," Francois said. "And the result is the trade deficit looks worse, especially for merchandise. So in a sense, when the economy is doing what it is doing now – creating lots of jobs and recovering from the COVID recession – you're going to see an increase in the deficit relative to the baseline that we had before."

You can read the full interview here.

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