The author seems to gloss over the economy not being a zero sum game.
As an example, since this is HN: the US creates a ton of startups. Any country that creates new businesses is going to see foreign investment, which on paper leads to a trade deficit. Essentially, the US exports businesses to the rest of the world, but that is not tallied in a 19th century model for the trade balance of goods. However, it's arguably a better export that commoditized goods, from a margin standpoint.
Overall these graphs change dramatically based on where the exact geographic boundaries are set and how one defines goods/services/investment. Clearly the US hasn't run out of cash and needed to massively print dollars to cover foreign debt, which would happen very quickly if the system were actually imbalanced.
This is a common soundbite and an unfair simplification. Non zero sum games often still have winners and losers. Also a positive sum trade deal for both sides does not mean it is the best trade deal.
"best" is highly subjective. It certainly might not deliver the highest dollar value across the exchange.
The reason for this highly unfair soundbite is that most international trade treaty processes are designed NOT to favour one economy over the others and use "most favoured nation" language to try and put equity on the table. Thats before the US enters the room: My reading online in years past says that every economy which did the TPP said it did better overall when the US walked away from that deal.
Trump and his negotiators are not remotely interested in fixing problems globally, they're fixing their own vision of internal problems. A 10% across the board impost on goods coming in is frankly ludicrous, and the lack of awareness about how VAT/GST models work for importers and exporters in Europe and like economies is pretty stunning: In no way does VAT impose a burden on US incoming goods. it's neutral to all sources. Yet, Trump and his negotiators want to pretend they don't know that.
I'm not an economist or a game theoretician. I'm fine with you correcting my simplified language, but I do not think it was unfairly applied to the current political situation. I'm a simpleton shouting about another simpleton: the one who thinks the only negotiation worth doing is one he "wins" in and for him, winning definitionally means somebody has to lose.
> Trump and his negotiators are not remotely interested in fixing problems globally, they're fixing their own vision of internal problems.
Look at their pharma complaints. Pharma companies (many of which are American, but far from all) develop new drugs. In single payer systems, these behemoths have to go against state managed insurance systems, which generally set specific rules for purchasing (maximum price, etc). As these pharma companies WANT to sell in all the markets they can, they accept these rules. As a result, drugs made by them cost, let's say, $100 in those countries.
In the US, where pharma companies are still behemoths, they can divide et impera insurance companies, so pharma companies pretty much impose their prices, leading to absurd stuff like fancier insulin costing $1000.
Now, instead of working to reduce costs in the US, too, Trump & co want to INCREASE the cost of these drugs globally.
Capital investment are potential future negative outflows. They do not replace exports (goods and services). That is unless these investments are a scam (ahem), investors are probably expecting a yield in the future and to retrieve their investment. Movement of capital will be good if it was balanced, but it is not: https://en.wikipedia.org/wiki/Net_international_investment_p...
The US runs a NIIP of negative $27 Trillion. This is a consequence of the trade deficit as the deficit is being financed mainly with this money.
Actually since the qe to fix 2008 foreign investors/governments cut down on bond buying. Treasury has foreign bond holdings up about 2T since 2014 and current account deficits sum to around 7T.
Nowadays we're mostly selling companies and real estate. (though there was a nice jump in bond buying a few years when rates went up)
Exporting business ownership when seen on a national level is just another form of debt. You're trading future production for stuff now.
The fundamental problem is that the balance of goods flows into the US today. If debts and profits are going to be paid out eventually that will have to reverse. But it's going to be politically impossible for the US to ever send out 5-10% of its GDP in goods. That's the fundamental problem.
You've fallen into the exact zero sum thinking trap that the parent comment mentioned. If investment causes the overall pie to be bigger, then both sides win with no tradeoff.
> If debts and profits are going to be paid out eventually that will have to reverse.
No it absolutely won't. The US exports financialization and technology services which don't show up on a trade deficit chart but do materially make the US and the world richer.
> You've fallen into the exact zero sum thinking trap that the parent comment mentioned. If investment causes the overall pie to be bigger, then both sides win with no tradeoff.
The economy is _not_ a zero-sum game. The world economy is _not_ a zero-sum game. Trade very much _is_ a zero-sum game because all the exports of all the countries have to be equal imports in the others -- worldwide imports and exports must net to zero. GP's point, if I understood it -and idk if it's correct-, is that to pay off our debt we'll have to export more than we import, but that the rest of the world will not allow that. The part of GP's argument that sounds like "zero-sum games" is about world trade, and world trade is zero-sum even though the world economy is not zero-sum.
I explained. Exports and imports must net to zero. It's very simple. It's very obvious. Start with a one-country world: no exports, no imports, zero. Then add a country, so now A's exports have to equal B's imports. Add a third, and keep doing this until you're convinced.
Or maybe a lot of it can't deliver returns in line with the current price. The world realizes that and stops sending us stuff for those investments. Then we're stuck with limited manufacturing, high inflation and relatively low ownership of our existing high value exports.
If the pie gets bigger too slowly then I think we still lose.
If I buy an apple from an orchard with money, I haven’t indebted myself an apple man. I got a real product for effectively an iou that everyone pretends has value and that orchard can trade to someone else for fertilizer. You have the entire concept backwards.
There was another reply here earlier that was saying it isn't a trade deficit. I wanted to steelman the parent post:
Foreign investment into USA companies reduces the USA trade deficit but it isn't tracked in traditional methods.
I've heard that foreign investment in real estate generally isn't counted as each country owns properties equally between the two, so it nets out. I wonder if investments into companies is the same?
> Foreign investment into USA companies reduces the USA trade deficit
Other way. Foreign investment doesn’t touch the trade account but the capital account. When the company the foreign investor invested in buys stuff, that alters the trade balance depending on what they buy from whom.
Other countries federal reserves like to diversify into other currencies to help guard against hyperinflation. And the dollar is stable as currencies go, so people are happy enough to buy T bills but now there are a bunch of say Kronors the US government doesn’t know what to do with, so let’s buy some oil, fish, and steel to get it back where it’s going without fucking with the exchange rate.
>However, it's arguably a better export that commoditized goods, from a margin standpoint.
Importantly, this is the same dynamic that causes economies to move away from manufacturing towards service-oriented economies. Capitalism is going to chase higher margins, but there should be guardrails that mitigate the negative externalities of such behavior. Else we are left with an eroded middle class, lack of supply chain resilience, disproportionate costs for sectors that can’t chase geo-arbitrage, weakened national security manufacturing capacity, etc.
The US is manufacturing more than ever and is the second largest manufacturer in the world after China. The US middle class has actually "eroded" upwards -- our wealthiest population cohort has tripled in the last thirty years.
That’s what the data shows until you peel back the covers and understand that nothing at all could be manufactured here at all without enormous imports of not just raw materials but partially completed goods. US manufacturing output looks large economically because it’s mostly final assembly of imported partially completed goods, but if you looked at the value added (manufacturing output minus imports) it would be much smaller than other countries like China which own entire supply chains.
I’m going to offer a less defense-oriented point of view: manufacturing jobs are more lucrative than service jobs that are available to uneducated people, and allow them to live a more prosperous, happy life. More of these jobs is a net benefit for society.
If you want a jobs program just say you want a jobs program. Instead of churning out uncompetitive widgets how about we tax the wealthy and employ people fixing our infrastructure?
It’s fallacious that manufacturing can’t be done competitively in the US, it absolutely can, but policy allows business owners to make slightly more profit by offshoring production, so that’s what happens.
Regarding fixing the infrastructure, I like that idea too, but the government is pretty incompetent and full of grifters so I don’t really think that’s an efficient way to get money to poor uneducated people - most of the money will go to consultants and non-profit directors and so on.
>the government is pretty incompetent and full of grifters
Is this based on actual data or just vibes from your interactions with the DMV, IRS, etc.?
Michael Lewis writes well about this. His perspective is that the govt often shoulders the hard problems that lack a clear path to profitability for private industry. He’s studied govt extensively and seems to have the opposite view.
I know you aren’t the other guy, but it’s a really interesting argument that despite spending more and more money every year to solve this kind of problem, and seeing that the problem is getting worse (quality of life and economic security for uneducated people, in this case), one can still argue that the government is actually efficient and competent. It seems obvious to me that they are not successfully solving this problem with spending. I know a natural reaction is to blame one political party or the other for being especially bad, but you can see a lot of examples of failures to improve outcomes despite increasing spending at the state and local levels for both parties in the US. So if a politician comes along and says you know what, let’s try to solve this problem with policy instead of spending, the people who are suffering listen to that, even if the outcome isn’t certain.
With respect, I asked for data and you came back with “it seems obvious to me…” without citing any real data. I know enough to know people who make feelings-based arguments can’t be persuaded by data-driven discussions.
A reference is not an appeal to authority, it’s an opportunity for you to verify the stance and poke holes in it if you have the capability to do so. You have the opportunity to use whatever authority you want and cherry pick data. I’m just asking for an effort that has some rigor beyond “I can’t prove it, I just know it’s true because my gut tells me so”
Because we can't actually make the strategic products. You might have a factory to assemble the highly strategic fighter jet in the US but it is problematic if you are dependent on foreign countries to source or manufacture the multitude of parts.
That was in the premise of the question. Obviously if you don't have a secure supply chain for all the parts of a jet, you don't have a secure supply chain for a jet.
This is a bad faith argument, and I think you know it. There is a wide gulf between “just a few industries” and “everything”. The first is naive and the latter is impractical. My suggestion is we take a targeted stance, where the solution resides in that gulf.
And for what it’s worth, your screw argument belies a poor understanding, especially given your example of a jet. Aerospace parts are notoriously expensive because we want to track and manage the entire supply chain. That’s why an airplane screw can cost $1k, when naive people assume you can just pick up an equivalent part at Home Depot.
I’m saying it’s much harder than your original comment insinuates. That jet in your example has tens of thousands of parts and if you want to protect the entire supply chain, it can’t just be a few companies. Many of those suppliers are also not just supporting jet manufacturers. Eg, a company that makes teflon o-rings for the jet likely makes o-rings for dozens of non-aerospace products. Complex machines are not nice, vertically integrated manufacturing ventures in the modern economy.
Perhaps I’m confused and misreading your previous comments. It seems like on one hand you’re advocating narrow application, while also saying an entire supply chain would need to be protected to have the intended effect. In a modern economy, those two seem in conflict in any complex system. This means the execution is neither easy nor obvious. The only one I can think of where that may apply is nuclear weapons, which is so tightly controlled it’s more of a quasi-government manufacturing endeavor.
Counterpoint: We aren’t necessarily manufacturing the things that contribute to national security in the same way we were after WW2. The DoD has listed lost manufacturing capacity as a major risk.
And I think you’ll need to elaborate more on your point about the middle class. Depending on how you measure it, people can move from middle class into upper class, but also into lower classes. Your post acts as if class mobility is only in one direction. A bifurcated distribution supports the point that the middle class is eroding.
By dollar value, but not by actual amount of manufacturing. When you peel back the US's real GDP growth, it just turns out prices rose faster than inflation.
A significant portion of the trade deficit is due to heavily discounted Canadian crude imports that American oil refineries refine and resell domestically and internationally at a large markup that brings in massive revenues.
American lobbying has to date successfully prevented Canada from building up its refinery capacity. Now that Trump doesn't seem to like this arrangement, Canada will likely simply stary refining its own crude.
This will definitely reduce the US trade deficit but may not be good overall for the American economy.
The blanket generalization that all trade deficits are subsidies is flat out wrong. You need to look into the details to determine whether a given trade arrangement is beneficial for the US or not.
No, in order to win a war, it must have a clear objective which can be successful. The US is terrible at this because the objectives of war by a democratic country will be set by politicians, who've never seen an objective which couldn't be made vaguer. Operation Iraqi Freedom had so many sub-objectives key military leadership didn't even agree what the goals all were - and even then some of those goals are nonsense, predicated upon false narratives spread by politicians who wanted a war and needed some sort of justification. Remember the Weapons of Mass Destruction your army was sent to find? Never existed. Terrorists they were sent to eliminate? More were created than had existed previously.
Battles may be won on logistics but you can't win a war without a clear and achievable objective. Corporate had a clear objective. Overlord had a clear objective. Take Desert Shield, to give an example of a US-led operation with clear objectives. If you turn up and the Iraqis all say "Fuck this, I'm off home" freeing Kuwait that's success. If you kill half the Iraqi population but they're still occupying Kuwait when your funding runs out that's failure. That's what you need if you want to win a war, clear objectives.
Under your premise that you must have a clear objective to the exclusion of other things, Russia would have handily won its war against Ukraine years ago. Their objectives are very clear.
I did, all the logistical prowess in the world can't help when your objective is too vague. Logistics are useful, often key to the final outcome, but they're nowhere close to the necessity of clear objectives.
> You joke, but wars are won on logistics. Famously, the US military can deploy a Burger King anywhere on Earth within 24 hours.
But not only on logistics. If the "US military can deploy a Burger King anywhere on Earth within 24 hours," but little else, it's fucked. Right now its production base is so addled and weakened that it can't even sustain the wartime production really needed by Ukraine without cleaning out the cupboards. It has only enough missiles to last days in a high intensity conflict, and the lead time for more is years. It definitely can't win in a sustained conflict against China (who has 40-effing% of world manufacturing capacity.
Which was part of the rationale for supporting Ukraine: the best way to build up a manufacturing base is if you have customers, and so supplying munitions to Ukraine was a win/win/win from the military's point of view: Ukraine gets ammo, the US gets to ramp up domestic military production with, effectively, someone else paying the bill. (Granted, some of that was US funds, so the 'someone else' was often another part of the US government, but the point stands in terms of manufacturing capacity.)
While there are shortages in some areas, I'm not aware of any reports of across-the-board procurement issues. In 2023 there was a shortage of 155mm artillery shells (at a production rate of ~8000/month), but no shortage of small arms ammo, APCs, or tactical vehicles [1]. By February 2025 the US was "manufacturing 30,000 155mm rounds per month" and "the Army is now “on a path” to producing 70,000 to 80,000 rounds per month by the end of 2024 or early 2025" [2].
That might not be enough to sustain a conflict with China if it started today, but it does demonstrate that the US is perfectly capable of scaling up domestic arms manufacturing if they choose to invest in it.
The increase in aircraft manufacturing during that period came at the expense of lost civilian automobile manufacturing. There were practically no civilian American cars made from 1942-1945. Same can be said for other industries. To a certain extent, this belies load shifting rather than increases in overall capacity like your statement may suggest.
Sure, if you want to stop making cars to make weapons instead for a long period of time. Have you ever retooled a highly automated assembly plant? I have, and I can tell you it’s not something that can be changed on a whim.
Is your contention that we should be churning out wartime levels of war materiel when we're not at war? Like specifically what do you think we should be doing?
To chime back in, my contention is that we should be churning out at least enough to keep Ukraine fully supplied without the need to ration, and the fact that we still aren't there 3+ years into this war is not a good sign.
Speaking more broadly, I think that the proper amount of war-related industry should depend not just on whether the war is ongoing or not, but on how likely it is. Right now I believe that a major war that US will likely need to participate in sooner or later is more likely than not by 2050.
I don't think our "not being there" has anything to do with ability but with political appetite. If both political parties wanted to produce a lot of shells, we'd produce a lot of shells. Right now one political party wants Ukraine to lose, so we don't.
My perspective is that we shouldn’t be trivializing the problem and recognize the tradeoffs and externalities. Pretending we have lots of manufacturing capacity for weapons systems because we know how to make cars misses the point of how difficult a transition from one to the other would be.
> A sustained conflict with a nuclear power is a no go. The risk of nuclear escalation is too great.
That was the rationale for letting the US military get into this state, but the conflict in Ukraine proved it to be unwise and founded on false assumptions.
You're conflating civilian production with military production. Does China have 40% of world military production? Or is the plan to throw electric golf carts at US aircraft carriers?
> weakened national security manufacturing capacity,
What products specifically would be a national security concern? The CHIPS act was passed to revitalize semiconductor manufacturing because we rely heavily on Taiwan. From my understanding, we already have a lot of domestic manufacturers for various parts, who are too expensive for the average American but are the main suppliers to the DoD.
As mentioned in another post, the DoD lists lack of manufacturing capabilities as a growing risk. There are many small batch parts that the US could manufacture, but companies aren’t interested. There are also those items which they no longer have the capacity to make, or deliver. Ted Koppel’s book Lights Out gives examples of long lead time items that can’t be made in the US and we also lack the ability to deliver them because the necessary infrastructure is no longer there
> Clearly the US hasn't run out of cash and needed to massively print dollars to cover foreign debt
Foreign debt is skyrocketing, with interest payments alone already becoming unworkable. Five or ten more years of this spells disaster, it’s totally unsustainable.
Either something very drastic has to change, or that money printer will have to go into overdrive.
Only if you find a way to tax the rich in other countries.
Taxing the US rich redistributes money within the country while the problem (or a perceived problem, depending on your stance) is that US bleeds money across the board.
Is the the "rich people will leave" argument? I can't tell.
If they're not willing to participate, I think we should call their bluff. We have helicopters and aircraft carriers, I don't think we couldn't track down a few rich tax evaders.
It's not a zero sum game over the long term, but at any moment it certainly is. At any moment there is a certain amount of money and generally it gets redistributed to the wealthy. So it's mostly zero sum. Yes the pie grows over time but the distribution gets worse over time. We call this inequality and it's growing.
As an example, since this is HN: the US creates a ton of startups. Any country that creates new businesses is going to see foreign investment, which on paper leads to a trade deficit. Essentially, the US exports businesses to the rest of the world, but that is not tallied in a 19th century model for the trade balance of goods. However, it's arguably a better export that commoditized goods, from a margin standpoint.
Overall these graphs change dramatically based on where the exact geographic boundaries are set and how one defines goods/services/investment. Clearly the US hasn't run out of cash and needed to massively print dollars to cover foreign debt, which would happen very quickly if the system were actually imbalanced.