The massive trade deficit is responsible for the decline in gdp. I believe I’ve read that in our time we would be >1% higher in gdp if we made the trade deficit reasonable. Not only does it have a negative outflow, but it costs jobs.
If we could halfway fix it, we would improve. How? The market is elastic. Buy those same goods from other Asian & developing countries with whom we do have a sane trade deal. To force that along, put big tariffs on China.
Yes the deficit cuts the GDP. However, if our exports decline even more, it cuts into the GDP even more. It’s a lose-lose situation. Without what exports we have to Europe, the GDP number would drop by a 0.5% at least.
There are several well known reasons for the deficit and they are complicated. Our trade deficits are hard to correct because of market distortions. Our society doesn’t save much and consumes more than it produces, thus the intake. Our country is the only LARGE country that is also very wealthy, which means much of our people can afford expensive imports like Mercedes cars (There are 330,000,000 people in the US and 80,000,000 in Germany and Americans are 1/3 richer per head). These two reasons are important causes but by far the biggest two reasons are the US government’s policy of keeping the value of the dollar high. This makes our products more expensive a lot of the time and when you add shipping costs over two gigantic oceans to reach most of the world’s people, it’s just too much for our companies to bother with. Most of our companies just manufacture in the country they operate in and only 10% of US companies actually export. And fully 25% of our exports come from ONE company-Boeing. The other big reason is the dollar’s status as the global currency. This, plus the petrodollar, keeps our currency elevated in the global money market and won’t let it adjust normally. While other countries see their currencies “float” normally, ours does not. This is why we can continue to sustain such high trade deficits without some sort of normal correction. It’s a complicated picture.
Since labor on durable goods and services is around 7% every $Billion in trade deficit represents $70 Million in lost US wages. So a $900B annual trade equates to $63B in lost US wages.