When President Donald Trump imposed sweeping new tariffs on imported goods on April 2, 2025 — upending global trade and sending markets into a tailspin — he presented the move as a response to a crisis. In an executive order released the same day, the White House said the move was necessary to address “the national emergency posed by the large and persistent trade deficit.”

A trade deficit (when a country imports more than it exports) is often viewed as a problem. And, yes, the U.S. trade deficit is both large and persistent. Yet, as an economist who has taught international finance at Boston University, the University of Chicago and Harvard, I maintain that far from a national emergency, this persistent deficit is actually a sign of America’s financial and technological dominance.

TRADE DEFICIT AS FLIP SIDE OF INVESTMENT MAGNET

A trade deficit sounds bad, but it is neither good nor bad.

It doesn’t mean the United States is lo