In other words, the trade deficit is simply a mirror reflection of the larger macroeconomic reality that investment in the United States exceeds domestic savings. If we want to change the U.S. trade deficit we must change the rate at which Americans save and invest. In a study published by the Cato Institute in April, I address four enduring myths about the U.S. trade deficit. Two of them relate to causes, two to consequences. The first myth is that the overall U.S. trade deficit is caused by unfair trade barriers abroad.
Foreign barriers are certainly a problem, just as our own barriers to imports remain a problem.
But trade restrictions do not determine the overall U.S. trade deficit, nor do they fully account for the differences in bilateral trade balances. For example, the United States runs a large trade surplus with Brazil, a country with relatively high trade barriers, while we run deficits with Mexico and Canada, two countries virtually open to U.S. exports. The second myth is that trade deficits are caused by a lack of U.S. industrial competitiveness. This myth has been refuted by the stellar performance of the American economy, which today is the envy of the world. Since 1992, the U.S. trade deficit has tripled .