Welcome to Econ Talk, Conversations for the Curious, part of the Library of Economics and Liberty.

I'm your host, Russ Roberts, of Sholem College in Jerusalem and Stanford University's Hoover Institution.

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Today is April 22nd, 2025, and my guest is economist and author Doug Irwin of Dartmouth College, where he is the John French Professor of Economics.

Our topic for today is tariffs, trade, trade deficits, and this rather dramatic moment we're in the middle of, although by the time this airs, things, of course, could be radically different.

So we're going to stick to the basics.

I'm hoping to create a primer for listeners, clearing up some fundamental misunderstanding some people are having.

Although I suspect at the end we'll touch on some of the details of this moment in particular.

Doug last appeared on Econ Talk in October of 2010, discussing the Great Depression and the Gold Standard an episode I highly recommend.

Doug, welcome back to Econ Talk.

Thanks for having me. Good to be here.

Let's start with trade deficits.

What's it mean when a country runs a trade deficit? What's the definition of a trade deficit?

Well, a trade deficit is simply when a country imports more than an export to the rest of the world. So that raises all sorts of questions, but that's the functional definition.

Sometimes it's called a current account deficit because it's a little bit broader than just merchandise. You have to include services and then other things of that sort.

And so if the United States, I want to talk about two examples that are people are discussing a lot these days.

The United States runs a trade deficit with respect to the rest of the world, the entire world.

That is, the United States imports more goods and services from the world than the world imports from the United States.

And it also runs a trade deficit with many individual countries of different magnitudes that, when aggregated, add up to the whole

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