TRADE DEFICITS TRADE : PRETTY PRECIS

MICHAEL PETTIS - a professor of finance at Peking University in Beijing who studies the topic, said the new tariffs might reroute the way trade moves through certain countries, but still not do much to change the size of the overall trade deficit the United States runs with the world.

'' They're focusing on the wrong problem, bilateral deficits,'' Mr. Pettis said.

Professor Pettis sees the overall trade deficit that the United States runs with the world as a problem for the American economy because it means that U.S. consumer demand for goods supports manufacturing activity elsewhere, like in China, rather than in the United States.

But he insists that the trade imbalances the United States has individually with other countries are not always reflective of that problem, and that tariffs won't necessarily do much to fix it.

In his view, government policies in places like China, Germany, South Korea and Taiwan are driving major trade surpluses.

Because every trade surplus needs a deficit to balance it, that ends up inflating the U.S. trade deficit.  Without bigger economic changes in China and other countries, these problems will still persist, he argues.

The World Students Society thanks Ana Swanson.