Financing the U.S. Trade Deficit
"The U.S. merchandise trade deficit is a part of the overall U.S. balance of payments, a summary
statement of all economic transactions between the residents of the United States and the rest of
the world, during a given period of time. Some Members of Congress and other observers have
grown concerned over the magnitude of the U.S. merchandise trade deficit and the associated
increase in U.S. dollar-denominated assets owned by foreigners. The recent slowdown in global
economic activity has reduced global trade flows and, consequently, reduced the size of the U.S.
trade deficit. This report provides an overview of the U.S. balance of payments, an explanation of
the broader role of capital flows in the U.S. economy, an explanation of how the country finances
its trade deficit or a trade surplus, and the implications for Congress and the country of the large
inflows of capital from abroad..."