What's the difference between trade deficit and national debt?

Question

Are they the same thing?

Answer 1

No, not the same thing. The trade deficit is the difference between what we sell to other countries versus what we buy from other countries and the national debt is how much more the government spends versus what is takes in from taxes.

Answer 2

Well, there are deficits and there are deficits.

It reminds me of a geography class where the professor was talking about the deserts of western U.S. having a water deficit. I couldn't resist, sarcastic soul that I am, what negative water looked like.

When the dollar value of exports is smaller than the dollar value of imports, this deficit has no direct connection to the amount of credit used by a nation, except in the context of the question. Think of it as apples and oranges, which can be connected if you are discussing fruit, but if you are talking apples, then you ignore issues involving oranges.

Some economies are more extensive and complex than others. A trade deficit by Botswanna is a little different than a trade deficit by the United States. Part of the idea is the nature of production, consumption, resources, and capacity of the respective nations. A continued trade deficit by Botswana, limited as their economic abilities are, means that they won't be able to continue that deficit in the balance of trade for as long as the United States. Eventually, no one will want to trade with Botswana because Botswana doesn't have anything to trade, as in give in exchange for the value of what they have received. The United States has been a net exporter of financial capital and industrial capacity for many years. We buy something from China, for instance, but part of the value is retained by an American firm or of a partner who provided the capital for the factory, perhaps financed the raw materials and operations for a while, designed the specifications for the product which is meanwhile also being sold to a hundred other countries. Eventually, we could become like Botswana, but our economic pie is considerably more extensive and expansive than theirs. Take, for instance, the national debt, while the United States owes a lot of foreign creditors for our bonds and notes, a substantial share of our federal debt is held by--agencies of government! The easiest two examples are the Federal Reserve and the Social Security Administration.

The Treasury buys and sells debt all the time, often trying to favorably optimize the interest rates they paid. It used to be that if there was going to be debt that would not soon be repaid, keep that in long-term bonds, but soon to be repaid debt stays in short term notes. Bill Clinton's Treasury boss, Ruben, noted how much cheaper short term debt was at that time, (and banks were only paying something like 1 percent on savings money at that time, if that much) so he moved a big mass of federal debt to short-term notes and away from long term bonds, saving us all a whale of a lot on interest payments. The unintended, or perhaps hoped for byproduct, was that this mass of money on the fluid money market helped grease the wheels of commerce, overcoming the burden of Clinton's higher income taxes. The same concept as our recent stimulus efforts, though the mechanics were different. Of course, the really cheap money was what got borrowed from the Social Security administration, absolutely scandalous at how cheap that money was being used.

In short, while the mechanics of one resembles the other, they are not the same things.

Answer 3

They are interconnected but not the same thing.  Trade deficit pertains to the difference between the amount of imports and the amount of exports.  By saying the U.S. has a trade deficit, you are saying that the U.S. imports more than it exports.  National debt simply refers to the fact that the government owes various people/groups money because it spends more moeny than it makes. They are related because the trade deficit funds the national debt (in the U.S.)  When the U.S. spends $5 on imports from China and China only wants to spend $3 on imports from the U.S., China has $2 sitting around that it can't use to purchase goods in China since China's currency is the yuan. Therefore it has two choices, sell the dollar for the yuan, which decreases the value of the dollar, or purchase U.S. securities, most often treasury bonds.  Since treasury bonds are in essence loans to the U.S. government, the trade deficit and the trading partners of the U.S. fund the national debt

Answer 4

Trade deficit = Imorts - Exports where, imports exceed exports.

National Debt = Outstandind debt that the Govt has to repay in the future from those who have given the loans to the Dovt. in order to enable the Govt. to spend more than t

Answer 5

Debt is accumulated value consisting of deficits (net surpluses) from different periods (also some interest rates could be involved).

Year.......Export.. .Import.......Net....... Name

------------- ------------- ------------- ------------- -----------

2003.......2000.......3000....... -1000.......Deficit

2004.......1500.......2800....... -1300.......Deficit

2005.......2300.......2100....... +200........Surplus

2006.......2600.......2000....... +600........Surplus

2007.......2200.......2400....... -200.........Deficit

------------- ------------- ------------- ------------- -----------

Accumulated value. ...............-1700...... Debt

Debt is accumulated value so

Debt=(Sum of deficits) - (sum of surpluses)

Debt= 1000+1300-200-600+200 = 1700