Do trade deficits matter?

Planet Money

NPR

Business, News

4.6 • 29.8K Ratings

🗓️ 9 April 2025

⏱️ 24 minutes

🔗️ Recording | iTunes | RSS

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Summary

At the heart of President Trump's tariffs is this idea that we should not be buying more from other countries than they are buying from us. Basically, he wants to get rid of the trade deficit.

And in the wake of the tariff announcement we got a LOT of questions from listeners about what that means. Do trade deficits matter? Is it bad to have a trade deficit? Are we getting ripped off?

Today on the show – we tackle those questions.

This episode of Planet Money was produced by Emma Peaslee and edited by Marianne McCune and Kenny Malone. It was fact checked by Sarah McClure and engineered by Kwesi Lee. Alex Goldmark is our executive producer.

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Transcript

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0:00.0	This is Planet Money from NPR.
0:05.5	James Surawiki is an economics writer for The Atlantic and a lover of one particular imported good.
0:13.0	I drink coffee. I like Sumatran coffee.
0:15.4	He buys his coffee from Indonesia. So last week when President Trump announced surprisingly high, surprisingly broad tariffs on
0:23.1	almost every country in the world, including Indonesia, James thought of his coffee.
0:28.1	One of the bizarre things about these tariffs is they're imposed on goods that we are never,
0:32.5	the United States can't make. To be fair, Hawaii does make coffee, but it's not even close to
0:37.3	enough.
0:38.1	So a new tariff on Indonesia means James's coffee is going to cost more.
0:43.3	And James was looking at this new tariff.
0:45.2	It was 32 percent and wondering how did they come up with that number?
0:50.2	So he sets out to see if he can figure it out.
0:52.6	We're putting a 32% tariff on imports from Indonesia because they say Indonesia's tariff rate is 64%.
1:00.8	They said, the Trump administration had said, these new tariffs were reciprocal.
1:05.3	They were supposed to be the combination of the tariffs a country charges us plus whatever other trade barriers they have on,
1:12.8	like regulations or fees. And the Trump administration said, Indonesia was effectively charging us
1:19.0	64%. But those numbers, they just did not seem right. And not just for Indonesia. So, I don't know, Vietnam at 90% or South Korea at 50%.
1:32.3	And if you knew anything about the global trade regime, you knew those numbers just seemed
1:38.5	totally out of whack.
1:40.1	Totally out of whack.
1:41.2	Because Indonesia does not actually charge the U.S. a 64% tariff.
1:46.6	It does have a tariff on U.S. imports of less than 10%, and it does have other trade barriers,
	...

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