<p>A central tenet of mercantilism is that every country should strive to have favorable balance of payments. However, this theory has long been abandoned (or so it seems), but leaders still appear to worry about large trade deficits. As examples, see how the U.S. responded to trade deficits versus Japan in the 1980s and China in the 2010s.</p>
<p>What is the main reason for caring about balance of payments per se?</p>
<p>To be clear, there are clear reasons to care about other aspects that <em>contribute</em> to worsening balance of payments, such as domestic unemployment. My question is about why one would care about trade deficits <em>per se</em>.</p>

CC BY-SA 4.0
2022-11-22T19:25:27.413Z
this might be better question for psychology.se. Indeed according to modern economics trade deficits are not matter to be concerned about. My best guess is that word deficit is viewed as a bad word since people create connotation deficit = bad thing, since in many aspects deficit can be a bad thing eg nutritional deficit, sleep deficit, house budget deficit etc. Hence when people hear the word deficit they automatically assume something bad is happening
1muflon1
CC BY-SA 4.0
2022-11-23T05:12:37.787Z
The definition of GDP=C+I+G+(X–M) leads to the very common misconception that GDP declines with higher imports. This is also something picked up by the media all the time, see for example this [question](https://economics.stackexchange.com/q/51501/37817).
AKdemy
CC BY-SA 4.0
2022-11-24T07:46:53.853Z
@1muflon1 I see what you are saying, but I really have trouble believing that these are all just psychological errors. There must be some sensible reason why people care about the balance of payments.
J Li
CC BY-SA 4.0
2022-11-24T07:47:17.763Z
@AKdemy see my response to 1mflon1 above. The same applies to you. (Thanks for your answer by the way)
J Li
<international-trade><balance-of-trade>
Why do certain modern country leaders care about trade deficits so much?
J Li
# Why do certain modern country leaders care about trade deficits so much?

(Asked by: username_0 on 2022-11-22)

A central tenet of mercantilism is that every country should strive to have favorable balance of payments. However, this theory has long been abandoned (or so it seems), but leaders still appear to worry about large trade deficits. As examples, see how the U.S. responded to trade deficits versus Japan in the 1980s and China in the 2010s.

What is the main reason for caring about balance of payments per se?

To be clear, there are clear reasons to care about other aspects that *contribute* to worsening balance of payments, such as domestic unemployment. My question is about why one would care about trade deficits *per se*.

**Tags:** international-trade, balance-of-trade
> **Comments:**
> **username_1**: this might be better question for psychology.se. Indeed according to modern economics trade deficits are not matter to be concerned about. My best guess is that word deficit is viewed as a bad word since people create connotation deficit = bad thing, since in many aspects deficit can be a bad thing eg nutritional deficit, sleep deficit, house budget deficit etc. Hence when people hear the word deficit they automatically assume something bad is happening  
> **username_2**: The definition of GDP=C+I+G+(X–M) leads to the very common misconception that GDP declines with higher imports. This is also something picked up by the media all the time, see for example this [question](https://economics.stackexchange.com/q/51501/37817).  
> **username_0**: @1muflon1 I see what you are saying, but I really have trouble believing that these are all just psychological errors. There must be some sensible reason why people care about the balance of payments.  
> **username_0**: @AKdemy see my response to 1mflon1 above. The same applies to you. (Thanks for your answer by the way)  

---

## 0 answers

