Congress has demonstrated long-standing interest in the U.S. trade deficit as part of its efforts to examine U.S. trade policy and key trading relationships. Congress's role in trade policy stems from a number of overlapping responsibilities, including Congress's constitutional authority over regulating commerce with foreign countries and broad oversight responsibility over the performance of the economy. In some areas, particularly in negotiating trade agreements, Congress has opted to delegate certain authorities to the executive branch. Interest in the trade deficit has been heightened by the Trump Administration, which has addressed trade broadly and trade agreements more directly through an assertive trade policy agenda that includes proposed increased tariff measures based on various trade investigations and vocal skepticism of past U.S. trade agreements and the potential benefits of trade. At times, the Trump Administration's approach to international trade agreements has been termed a "reset," or a renegotiation of past agreements, while at other times it has been viewed as a fundamental change in U.S. trade policy. A key element of the Trump Administration's approach to international trade has been the use of the U.S. trade deficit as a barometer for evaluating the success or failure of the global trading system, U.S. trade policy, and trade agreements. Although Congress and previous Administrations have focused on the trade deficit as a key economic issue at times, they generally have not implemented specific measures to lower the trade deficit or to make reducing bilateral trade deficits a major objective in evaluating or negotiating U.S. free trade agreements (FTAs). In addition, previous Administrations have largely avoided linking the broad rubric of national economic security, including trade policy and U.S. trade deficits, with other elements of U.S. national security. Rather than using tariffs and other sectoral policies to protect the interests of specific firms or specific sectors of the economy, the United States has used monetary, fiscal, and other broad policies to affect the overall course of the economy and relied on market forces to sort out which firms or sectors are successful. It also has used numerous other policy tools to address specific trade and investment issues regarding U.S. commercial economic engagement with other countries to achieve a level playing field, and other trade policy objectives. The Trump Administration has reportedly justified its approach to trade negotiations by characterizing U.S. free trade agreements (FTAs) as unfair and detrimental to the economy, in part basing this conclusion on the size of bilateral and overall U.S. trade deficits. The Administration also has reportedly characterized the trade deficit as a major factor in a number of perceived ills afflicting the U.S. economy, including the rate of unemployment and slow gains in wages. Some analysts argue that trade agreements play an important role in the U.S. trade deficit; they contend the agreements have failed to provide U.S. exporters with reciprocal treatment or have exposed U.S. producers to increased competition. They also argue that trade deficits have cost U.S. jobs; depressed wages; are economically unsustainable; or result from unfair trade practices by foreign competitors. These issues will be addressed in later sections of this report. While most economists are concerned over the long-term impact of sustained trade deficits on the economy, they question the role that trade agreements play in determining the trade deficit or the conclusion that the trade deficit is substantially the product of unfair treatment. Instead, standard trade theory contends that trade represents an exchange of assets between willing participants who engage in trade because they believe it maximizes their best interests. On March 8, 2018, the Trump Administration announced that it would apply 10% tariffs on aluminum and 25% on steel products from several U.S. trading partners, based on an investigation under Section 232 of the potential national security impact of these imports. Similarly, the Administration announced on May 24, 2018, a Section 232 investigation into the potential national security implications of imported automobiles with potential imposition of new tariffs depending on the outcome of the investigation. The Administration also announced on March 22, 2018, that it would impose new tariffs on $50 billion in Chinese exports to the United States as a result of an investigation under Section 301 of China's trade practices on intellectual property and forced technology transfers; subsequently, the Trump Administration and the Chinese government announced the possible imposition of additional tariffs on each other's imports. Although negotiations had been underway to remove some of the proposed tariff measures related to steel and aluminum imports, the Trump Administration ended a temporary exemption from the tariffs on May 31, 2018, and proceeded to impose tariffs on steel and aluminum products imported from China, Canada, Mexico, the European Union, and other countries. To date, the amounts of proposed tariffs that have been announced are small relative to the total value of U.S. annual imports (over $2 trillion), but the actions have raised concern in financial markets, various industries, and U.S. allies over the prospect of escalating tariffs among trading partners. As the chief architect of the post-WWII global trading system rules and institutions, the United States generally has imposed trade restrictions under Sections 232 and 301 in limited instances since these laws were first enacted decades ago. The overall U.S. trade deficit, or more broadly the current account balance, represents an accounting principle that expresses the difference between the country's exports and imports of goods and services. The United States has experienced an annual current account deficit since the mid-1970s. Some observers view this deficit with concern because they believe it costs U.S. jobs; depresses wages; is economically unsustainable; or results from unfair trade practices by foreign competitors. Most economists, however, argue that this characterization misrepresents the nature of the trade deficit and the role of trade in the U.S. economy. In general, most economists conclude that the overall U.S. trade deficit stems from U.S. macroeconomic policies and, as such, attempting to alter the trade deficit without addressing the underlying macroeconomic issues would be counterproductive and create distortions in the economy. This approach, however, does not preclude the possibility that some countries are not fully abiding by international trade agreements and rules or have in place other trade practices that may be discriminatory or present barriers to U.S. market access. Addressing these issues may be worthwhile, but is unlikely to affect the overall U.S. trade deficit. Economic theory also generally concludes that liberalized trade creates both economic costs and benefits, but that the economy as a whole benefits over the long run from a more open trade environment and greater competition, because such an environment pushes an economy to use its resources more efficiently. Standard economic theory recognizes, however, that some workers and producers in the economy may experience a disproportionate share of the short-term adjustment costs that are associated with shifts in resources stemming from greater international competition. Although the attendant adjustment costs for businesses and labor are difficult to measure, some estimates suggest they may be significant over the short run and can entail dislocations for some segments of the labor force, companies, and communities. Closed plants can result in depressed commercial and residential property values and lost tax revenues, with effects on local schools, local public infrastructure, and local community viability. This report examines the components of the U.S. trade deficit in terms of the merchandise trade account and the broader current account. It also assesses the relationship between the trade deficit and U.S. free trade agreements, perceived unfair treatment in trading relationships, the trade deficit and U.S. rates of unemployment, and the impact of tariffs on the U.S. trade deficit, as well as raises issues for potential congressional consideration. The U.S. merchandise trade deficit, a frequent focus of the Trump Administration, is an accounting of the net balance of exports and imports of goods; it is one component of the overall balance of payments. A broader measure of U.S. global economic engagement, the current account, includes trade in goods, services, and some official, or government, flows. U.S. exports in 2017 are estimated to be about $1.5 trillion; imports are estimated at $2.4 trillion; and the merchandise (goods) trade deficit is estimated to be around $811 billion on a balance of payments basis. Exports account for about 13% of U.S. GDP, while imports account for about 16%. Exports of services in 2017 are estimated to be about $781 billion, with services imports valued at about $538 billion, or a services surplus of about $243 billion. As a result, the combined goods and services deficit, or the current account balance, is estimated to have been about -$568 billion in 2017. Relative to the size of the U.S. economy, as measured by U.S. gross domestic product (GDP), the current account deficit currently is equivalent to less than 3.0% of U.S. GDP, as shown in Figure 1 . Between 2002 and 2007, the current account deficit grew from less than -4.0% to nearly -6.0% of U.S. GDP, reflecting a low overall national rate of saving and large capital inflows. The financial and housing mortgage lending crises from 2007 to 2009 and slowdown in global trade reduced the current account deficit by half by 2010, where it has since moved between -2.0% and -3.0% of U.S. GDP. During the decade of the 2000s, the current account deficit-to-GDP ratio averaged about -4%; after 2010, the share averaged about -3% of U.S. GDP. These values contrast with the average shares in the 1940-1970 period, when the current account-to-GDP share typically averaged less than a positive 1%, or the current account was in surplus. As shown in Figure 2 , the United States annually experiences a deficit in goods trade, but a surplus in services trade. By standard convention, each transaction in the balance of payments has a corresponding and offsetting transaction.