Fixing the US trade deficit comes at the cost of growth

TO nobody's surprise, Donald Trump is a walking contradiction. This is especially true on two of his signature issues: He wants to maximise US domestic economic growth - and, in the interest of "fairness", do away with US trade deficits.

Mr Trump boasts about having signed a major tax cut and is putting the United States on a spending spree. What he completely fails to understand is that, precisely because he has chosen to further widen US fiscal deficits for years to come, higher trade deficits for the United States are the inevitable consequence. Hence, two of Mr Trump's core promises cancel each other out.

Every country's so-called balance-of-payments - which accounts for all economic activity of that country with the rest of the world - has two major entries. One is the current account, ie, flows of goods, services and income to and from abroad. The other major entry is the capital account, ie, flows of lending to and borrowing from abroad.