So what is all this talk about a trade war? We’ll tax China and Canada, Trump says. Other countries want to tax America?

What is international trade? What does it mean to our economy?

The” balance of trade” is the difference between the value of a country’s imports and exports for a given period. The balance of trade (BOT) is the largest component of a country’s balance of payments. Economists use the BOT to measure the relative strength of a country’s economy. The balance of trade is also referred to as the trade balance or the international trade balance.

The balance of trade, commercial balance, or net exports. is the difference between the monetary value of a nation’s exports and imports over a certain period.

If a country exports a greater value than it imports, it has a trade surplus or positive balance. Conversely, if a country imports a greater value than it exports, it has a trade deficit or negative balance. The notion that bilateral trade deficits are bad in and of themselves is overwhelmingly rejected by trade experts and economists.

Since the mid-1980s, the U.S. has had a big deficit, especially with Asian nations (e.g. China and Japan) which now hold large sums of U.S debt that has in part funded the consumption. The U.S. has a trade surplus with nations such as Australia.

Exports directly increase and imports directly reduce a nation’s balance of trade (i.e. net exports). A trade surplus is a positive net balance of trade, and a trade deficit is a negative net balance of trade. Due to the balance of trade being explicitly added to the calculation of the nation’s gross domestic product using the expenditure method of calculating gross domestic product (i.e. GDP), trade surpluses are contributions and trade deficits are “drags” upon their nation’s GDP.

Economies which have savings surpluses, such as Japan and Germany, typically run trade surpluses. China, a high-growth economy, has tended to run trade surpluses. A higher savings rate generally corresponds to a trade surplus. Correspondingly, the U.S. with its lower savings rate has tended to run high trade deficits, especially with Asian nations.

Historically, in simple U.S. terms, international trade generally only has a 10 percent effect on our economy.

But over the last 30 years, we have allowed our trade balances, with China, specifically, to get out of hand. Looking at the attached trade chart for 2016, you can see many things.

Like, for example, three countries represent over 60 percent of world trade: The European Union, U.S. and China.

Looking at the chart further, The biggest international seller,is China–their exports increased by 74 percent year over year and is six percent of world trade for 2016. The biggest buyer of goods and services is the U.S., buying 35 percent more, year over year, and represented nine percent of world trade.

Now, without speaking about other countries economics, if we continue to run our trade deficits this way, we can see the trade deficit becoming even bigger–sadly going up to 14 percent of world trade, versus ten percent.

In simple terms, this means U.S. economic growth will drag and when the economy drags people lose jobs. The higher our deficit goes, the lower we can continue to save.

Why don’t we see this in our numbers today? Well, since consumer and investment spending make up 70 percent of U.S. economic growth, the U.S. tax cuts has consumers, spending, businesses, building, and unemployment going down, to record levels. Some economists would say this is a nice off balance.

But do we as a nation want to continue to be a buyer not a seller to world trade? What happens when we need another economic boost? More importantly what’s going to happen when this trade Imbalance catches up to our economy during a period when our economy is not booming?

A trade war? Nah! Economic fairness? Maybe!

Anthony Rivieccio is the founder and CEO of The Financial Advisors Group, celebrating its 20th year as a fee-only financial planning firm specializing in solving ones financial problems. Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News, and The Bronx Chronicle. Mr Rivieccio is also currently an Adjunct Professor of Business , Finance & Accounting for both,  City University of New York & Monroe College, a Private University.  For financial assistance , Anthony can be reached at  (347) 575-5045. Feel free to visit their FACEBOOK Business page for past Financial Focus articles:  www.facebook.com/iwantmytaxmoney