The Commercial Real Estate Alpha Site

Trade gap grows

Give and take … The U.S. trade deficit—the difference between what we buy from the rest of the world and what we sell to the rest of the world—reached a record $1.2 trillion in 2024, marking the fourth consecutive year above the $1 trillion mark.   Despite the president’s ire toward trade deficits in concept, economists say they are not inherently bad. Deficits can indicate strong domestic demand and allow consumers access to a wider variety of goods, though persistent deficits may raise concerns about economic sustainability and competitiveness.  Looking at trade deficit in aggregate doesn’t tell the complete picture, since different countries specialize in different industries. For example, Japan, which lacks natural resources, imports oil and raw materials but runs a surplus in high-value exports like cars and electronics. Similarly, the U.S. imports large quantities of manufactured goods but excels in exporting services and high-tech products. This kind of trade imbalance is normal and reflects the global division of labor, where countries focus on what they produce most efficiently.

Despite arguments that say tariffs can reinvigorate manufacturing in the U.S., doing so may not guarantee that these will be well-paying jobs. Many low-cost goods, like toys and textiles, are produced in countries where labor is cheaper. Returning these industries to the U.S. would likely mean higher consumer prices or lower wages.  The biggest trade deficits in 2024 were with China, Mexico, Vietnam, and Ireland. Germany, Taiwan, Japan, South Korea, Canada, and India also ranked in the top ten. While tariffs have shifted trade patterns, they have not reduced the overall deficit. The real challenge lies in balancing economic growth with sustainable trade policies.