US itself to blame for trade deficits

Holding China responsible for the US' trade deficits and unemployment, US President Donald Trump has launched what could turn into a full-blown trade war against China, by imposing high tariffs on Chinese products and strictly restricting technology transfer. But data show the US itself is responsible for its trade deficits, and cannot solve the problem without undergoing a radical economic transformation.

The US trade deficit has its roots in Washington's expansionary monetary policy that started with the United States unilaterally canceling the direct convertibility of the US dollar to gold in 1971 (known as the "Nixon shock"). President Richard Nixon took a series of measures in 1971 that effectively rendered the Bretton woods system inoperative, and by 1973 the US replaced the Bretton Woods system de facto by a system based on freely floating flat currencies.

Consumption-reserve gap raised US deficits