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Why does the U.S. always run a trade deficit?

Persistent shortfalls in domestic savings, requiring funds from abroad to finance domestic investment spending, could be why the U.S. runs a trade deficit.

Note that these inflows are fungible, so they might initially be used to buy U.S. government bonds, but that frees up other funds to finance the building of homes and the outfitting of factories. Household saving as a share of GDP held up well during the financial crisis, then moved above its pre-crisis level until the pandemic, when it jumped as a result of government transfers and restrictions on consumer spending. Studieshave found that episodes of substantial reductions in trade deficits were typically facilitated initially by lower investment spending and subsequently through higher saving, as was the case with the improvement in the U.S. current account during the 2008 recession and its aftermath.

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