Originally published in The Washington Post

May 5, 2017

Everything you need to know about trade economics, in 70 words


By George P. Shultz and Martin Feldstein

(PDF Version)

If a country consumes more than it produces, it must import more than it exports. Thatís not a rip-off; thatís arithmetic.

If we manage to negotiate a reduction in the Chinese trade surplus with the United States, we will have an increased trade deficit with some other country.

Federal deficit spending, a massive and continuing act of dissaving, is the culprit. Control that spending and you will control trade deficits.

The challenge will be to do all of this without increasing long-run fiscal problems. The federal governmentís debt has already more than doubled in the past decade, reaching upward of 75% of GDP. The Congressional Budget Office projects that the debt will grow to more than 100% of GDP in the next 15 years even without a reduction in tax revenue or an increase in defense outlays.

George P. Shultz, a former U.S. secretary of labor, treasury and state, is a distinguished fellow at the Hoover Institution. Martin Feldstein is professor of economics at Harvard University and former chairman of the Council of Economic Advisers and president of the National Bureau of Economic Research.