<p>First off, just because economists say that the trade deficit is not a negative thing, does not mean it is positive.</p>

<p>Yes, trade is balanced in the long run. In and of itself, a trade deficit is therefore not <em>necessarily</em> an issue.</p>

<p>When a country runs a trade deficit that means that it is consuming more than it produces. The country consumes at least as much as it produced and then a bit from what other countries produced too. That in itself is not a bad thing. In fact, consuming more than you produce seems rather nice.</p>

<p>However, a trade deficit may also be a symptom of other economic weaknesses. A perpetual deficit may also be the precursor to a crisis. So whether a deficit in a certain case is bad or good depends on the circumstances. A good source is <a href="https://www.imf.org/external/pubs/ft/fandd/basics/current.htm" rel="nofollow noreferrer">this IMF report</a>.</p>

<p>That being said, it is incorrect and a bit naive to simply see every trade deficit as a problem.</p>

CC BY-SA 4.0
2019-08-14T16:07:02.470Z
2019-08-14T16:07:02.470Z
BB King
<p>In general most economist agree that deficit is not a negative thing, but I have trouble understanding why</p>

<p>For example if country A has 10\$ and country A runs trade deficit to B of 2\$ per year, doesn't this necessary mean that in 5 year country A can no long buy product from other country?</p>

<p>I think I am missing something important here. How can a country run trade deficit multiple years without eventually going bankrupt? </p>

<p>One reason that I have been given is that since country A buys country B's product in country A's currency, country B must use that currency in country A, thus the trade is balance in the long run, is that true?</p>

CC BY-SA 4.0
2019-08-15T08:56:12.827Z
*"One reason that I have been given [...]"* who says that ? This is far from being true, e.g. see [this](https://ec.europa.eu/eurostat/statistics-explained/index.php/Extra-EU_trade_by_invoicing_currency). Actually, this is generally the contrary, i.e. country A buys country B's product in country B's currency $\iff$ country A buys country B's currency to buy country B's product.
keepAlive
<international-trade><balance-of-trade>
Why is trade deficit a good thing?
user10714010
# Why is trade deficit a good thing?

(Asked by: username_0 on 2019-08-13)

In general most economist agree that deficit is not a negative thing, but I have trouble understanding why

For example if country A has 10\$ and country A runs trade deficit to B of 2\$ per year, doesn't this necessary mean that in 5 year country A can no long buy product from other country?

I think I am missing something important here. How can a country run trade deficit multiple years without eventually going bankrupt?

One reason that I have been given is that since country A buys country B's product in country A's currency, country B must use that currency in country A, thus the trade is balance in the long run, is that true?

**Tags:** international-trade, balance-of-trade

> **Comments:**
> **username_1**: *"One reason that I have been given [...]"* who says that ? This is far from being true, e.g. see [this](https://ec.europa.eu/eurostat/statistics-explained/index.php/Extra-EU_trade_by_invoicing_currency). Actually, this is generally the contrary, i.e. country A buys country B's product in country B's currency $\iff$ country A buys country B's currency to buy country B's product.  

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## 1 answers

### Answer by username_2 on 2019-08-14. Score: 1

First off, just because economists say that the trade deficit is not a negative thing, does not mean it is positive.

Yes, trade is balanced in the long run. In and of itself, a trade deficit is therefore not *necessarily* an issue.

When a country runs a trade deficit that means that it is consuming more than it produces. The country consumes at least as much as it produced and then a bit from what other countries produced too. That in itself is not a bad thing. In fact, consuming more than you produce seems rather nice.

However, a trade deficit may also be a symptom of other economic weaknesses. A perpetual deficit may also be the precursor to a crisis. So whether a deficit in a certain case is bad or good depends on the circumstances. A good source is [this IMF report](https://www.imf.org/external/pubs/ft/fandd/basics/current.htm).

That being said, it is incorrect and a bit naive to simply see every trade deficit as a problem.


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