Those of us who study trade and investment for a living are, I suspect, becoming exasperated with both the White House stance on tariffs and the way that this is reported in much of the media. US president Donald Trump believes that if a country has a trade surplus with the US it is somehow playing unfairly and needs to be dealt with. But anyone who understands the basics of international economics will recognise the fallacy in both of these beliefs.
Trade takes place based on what economists call “comparative advantage” – countries import those goods that are otherwise relatively expensive for them to produce. And they export what they produce cheaply relative to other countries.
So the UK, for example, has a trade surplus in services but a deficit in goods that are made in low-cost locations. This is similar to the position of the US.
