An excellent piece from Caroline Freund:
Freund notes:
“The US trade deficit
has grown over time because the country as a whole saves less than it did in
the past. The personal saving rate fell
from 8% in the early 1990s to 5.5% in recent years. At the same time, the government deficit
expanded. Unless savings rise or investment falls, the aggregate trade deficit
will not be reduced. From this
perspective, policies that encourage people, businesses, or the government to
save will have a bigger impact on improving the trade deficit than trade
policy.”
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