Senator Rand Paul appeared on ABC’s This Week Sunday and challenged the notion that trade deficits reflect any meaningful economic concern, calling the idea an “economic fallacy.”
Host Jonathan Karl brought up the issue of tariffs, noting, “Let me turn to tariffs. The president also announced a temporary reduction to those big China tariffs, still 30% tariffs on goods coming in from China as he negotiates, tries to negotiate a new deal. Walmart has warned this will result in higher prices. What is your assessment?”
In response, Paul pushed back against the rationale behind tariffs, explaining, “Well, tariffs are taxes and when you put a tax on a business, it is always passed through as a cost. There will be higher prices.” He then went on to clarify that trade isn’t something done by countries, but by individuals and companies. “What is important to know, people talk about, oh, this is America versus China. The U.S. doesn’t trade with China, you trade with Walmart, you trade with Target, you trade with Amazon. Americans go in and buy a product, it might come from China.” He illustrated his point with a simple example: “Think about it this way, think about the entire trade with China, was all TVs, a million people go to Walmart and all buy a TV, they like the quality, they like the price, they happen to come from China. Then you draw a circle around China and the U.S. and say, my goodness, it is a trade deficit, we buy all of our TVs from over there. But each individual transaction, each individual who bought a TV was happy, but how can you draw a circle around a million happy people and say they all got ripped off?”
Paul concluded that the common understanding of trade deficits is misguided. “There is an economic fallacy here and the fallacy is that trade deficits actually mean anything. They’re an artificial accounting. The only trade that means anything is the individual who buys something. That’s the only real trade and that, by very definition of its voluntary is mutually beneficial or the trade doesn’t occur.”
He closed by offering historical context to support his argument: “We had a trade deficit with China ever since 1976 and yet we got richer and they got richer.”

{Matzav.com}