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So then, here's a little illustration of unintended consequences.

Trump likes making deals. I mean, he certainly likes announcing deals, and it seems very integral to his political identity. Hence, one of the main early things to come out of his trip to the Middle East is the announcement of a big investment by Saudi Arabia in the U.S.:

https://www.whitehouse.gov/fact-sheets/2025/05/fac...

Here's the thing, though - foreign investment in the U.S. makes trade deficits worse, ceteris paribus. It's the basic national financial identity (in an open economy like ours) - your trade deficit is equal to your investments minus net savings. If you create an exogenous demand for increased investment in the U.S. (like jawboning the Saudis into buying US assets...I mean, investing in our economy), you increase the trade deficit. The Saudis have to buy dollars to make their investments, which makes the dollar a little stronger vs. other currencies, which makes imports go up and exports go down. It all has to balance (which is why it's an identity).

Part of the reason why we run such a huge trade deficit is because there is so much demand to invest in the U.S. - not just in public debt, which is often the subject of this discussion, but also investment in private assets. So when you go out and convince the Saudis to increase their FDI in the U.S., you end up making the trade deficit worse.

Part of the reason why we run such a huge trade deficit is because there is so much demand to invest in the U.S. - not just in public debt, which is often the subject of this discussion, but also investment in private assets. So when you go out and convince the Saudis to increase their FDI in the U.S., you end up making the trade deficit worse.

Uhhh...you're missing a number of things here.

The equation for national income is:

GDP = C + I + G + (Net exports)

GDP = Gross domestic product
C = consumption (spending by the public)
I = investment
G = Government spending
Net exports = Difference between exports and imports. Imports are negative, exports are positive.

So.

Increasing I? Adds to the GDP.
If the increase in Investments is in a factory that makes something sellable to the rest of the world, exports go up. If the investment in the factory lessens the reliance on an import, then imports go down while exports go up.

So foreign investments don't make trade balances worse, per se. I suppose somebody could buy up a bunch of farmland that was producing food and then idle it, thus making us buy something from someplace else but it generally doesn't work that way.

Let's look at this deal:

Saudi Arabian DataVolt is moving forward with plans to invest $20 billion in AI data centers and energy infrastructure in the United States.
Google, DataVolt, Oracle, Salesforce, AMD, and Uber are committing to invest $80 billion in cutting-edge transformative technologies in both countries.

Data centers and energy infrastructure are jobs and money spent here in the US. Then there's the output of the data centers.

Iconic American companies including Hill International, Jacobs, Parsons, and AECOM are building key infrastructure projects like King Salman International Airport, King Salman Park, The Vault, Qiddiya City, and much more totaling $2 billion in U.S. services exports.

That's hiring US firms to do services abroad.

Additional major exports include GE Vernova’s gas turbines and energy solutions totaling $14.2 billion and Boeing 737-8 passenger aircraft for AviLease totaling $4.8 billion.

More exports.

In the healthcare sector, Shamekh IV Solutions, LLC will be investing $5.8 billion, including a plant in Michigan to launch a high-capacity IV fluid facility.

Building a plant here to make and export things.


Investment partnerships include several sector-specific funds with a strong emphasis on U.S. deployment—such as the $5 billion Energy Investment Fund, the $5 billion New Era Aerospace and Defense Technology Fund, and the $4 billion Enfield Sports Global Sports Fund—each channeling substantial capital into American industries, driving innovation, and creating high-quality jobs across the United States.

Various funds that all go toward the "I" category.

Then there's
Underscoring our commitment to strengthening our defense and security partnership, the United States and Saudi Arabia signed the largest defense sales agreement in history—nearly $142 billion, providing Saudi Arabia with state-of-the-art warfighting equipment and services from over a dozen U.S. defense firms.

$142 Billion in direct sales for F-35s and F-15EX's (most likely) and other stuff. That's another win in the "E" column.

So, no. This deal looks great on paper.

The equation for national income is:

GDP = C + I + G + (Net exports)

That's the wrong equation. I was referring to the national saving and investment identity:

S +  (M – X) = I +  (G – T)

S = savings
M = imports
X = exports
I = investment
G = government spending
T = taxation.

Basically, it just illustrates that your nation's current account and capital account have to balance. By definition. The exchange rate will adjust so that capital inflows match current account outflows, or vice-versa in a country running a current account surplus. So if you increase your capital account inflows (by increasing foreign direct investment), you have to have an increase in your current account outflows (a higher trade deficit), other things being equal.

We have a big trade deficit (M - X), because we have both a big government deficit (G - T) and a lot of investment in our country (I) that isn't funded by our savings (S). So if Trump is out there driving up more FDI, that's going to increase the trade deficit. Because again, the current and capital accounts have to balance.

Here's a good explainer:

https://opened.cuny.edu/courseware/lesson/536/over...

Part of the reason why we run such a huge trade deficit is because there is so much demand to invest in the U.S.

And the trade deficit is a lot smaller when you include non-material things (i.e. "intellectual" products). There's still a deficit with many/most countries, but the administration ignores that part of our exports when presenting their data.

Maybe that's just a quibble. The larger picture is that we are seeing the destruction of a trade policy that benefited us tremendously, as witnessed by our prosperity compared to most other nations. I'm not sure it can be repaired once the Felon is gone. First, MAGA isn't going anywhere. And, second, other nations will be making other arrangements for the next four years.

The Saudis have to buy dollars to make their investments

Only if they do not already have surplus US $ to use--which they do have.

Only if they do not already have surplus US $ to use--which they do have.

I doubt they have many actual dollars lying around. The dollars that they have previously acquired have all almost certainly been invested already, whether in t-bills or private assets.

including a plant in Michigan to launch a high-capacity IV fluid facility.

For which market(s)? Fluids shipped OUT of the US are sending US resources for use elsewhere in the world--and thus not available for use in the US when needed.

Remember the IV plant in NC that was destroyed a year or so ago? They did mostly domestic shipping--and manufactured EMPTY bags-which were mostly filled by the buyer as needed.

I doubt they have many actual dollars lying around. The dollars that they have previously acquired have all almost certainly been invested already, whether in t-bills or private assets.

You identified several possible ways to obtain US $ if/when needed. Selling assets owned could be one way. US Treasury debt is continuously being retired and resold, so any debt owned by the Saudis could be used to pay bills in US $ as they came due (IMO, they have the ability to do so--if they find it necessary). Another point is simple: They will almost always have US $ being paid to them for oil sales, so those funds could also be used when available.

You identified several possible ways to obtain US $ if/when needed. Selling assets owned could be one way. US Treasury debt is continuously being retired and resold, so any debt owned by the Saudis could be used to pay bills in US $ as they came due (IMO, they have the ability to do so--if they find it necessary). Another point is simple: They will almost always have US $ being paid to them for oil sales, so those funds could also be used when available.

Sure, but all that's kind of "baked in" to the status quo. This happens all the time, and has been happening for years and years - we run a current account deficit, and our trading partners invest their surplus dollars in the U.S. That's the "other things being equal" part of the discussion.

What we're talking about here is the President using his influence to jawbone the Saudis into doing more FDI in the U.S. - choosing to go out and buy more dollars than they otherwise would, so that they can "import" more U.S. assets. When you do that, other things being equal, you drive up the "investment" component of the national savings and investment equation, which drives up the trade deficit.

i would counter that the irony (completely lost on MAGA) appears that the majority of the trump family 'new found' tangible wealth is being invested almost entirely in foreign nations.
the trip this week to the middle east is only going to turbo that.

this will certainly provide trumplings of all ages an extra layer of protection in case scotus or congress attempts some pathetic protest.

https://www.citizensforethics.org/reports-investig...
(probably outdated already)

https://www.seattletimes.com/business/trump-sons-d...


of course, using other people's capital, trump had to construct certain american infrastructure to receive funding to funnel all this :
- gop coffers
- djt
- trumpcoin
- crypto exchanges
- pay-per-meet&greet
- low income MAGA junk (bibles, sneakers, etc..)

Corrupt One in Chief gets a multi-hundred million 747 in return as a "gift", so that payola makes it a good deal. Unreal.

"Maybe that's just a quibble. The larger picture is that we are seeing the destruction of a trade policy that benefited us tremendously, as witnessed by our prosperity compared to most other nations. I'm not sure it can be repaired once the Felon is gone. First, MAGA isn't going anywhere. And, second, other nations will be making other arrangements for the next four years."

I have made this comment elsewhere but it applies here.

Other countries are not going to go back to trusting the U.S. once Trump is gone. Trump is just a symptom, not the actual root cause.

Prior to the recent election, Trump had already served one term as president and made it abundantly clear who he was as a president. It was blatantly clear to most of the rest of the world (as well as 49% of American voters) what Trump was going to do when elected. Yet enough Americans got together and said "Yeah, we will have more of that" and elected him again. It is a given that the rest of the world does not trust Trump beyond how easy he is manipulated. What many do not realize is that the rest of the world no longer trusts America (or the American voting populace) either.

Trump could die tomorrow, and the Democrats could take the house in 2026 and the Senate and presidency in 2028 and the rest of the world would still not trust America because the root cause (the American electorate that elected Trump a second time) would still be there lurking.

Trump is just a symptom, not the actual root cause.
Absolutely. The "problem" is also not isolated to the US, looking at Brexit as a parallel case. Populism continues to spread throughout Europe.

Oddly enough, since the US was already the most "multicultural" nation, I felt we had the best chance of surviving this worldwide mass migration with a minimum of upset. I was clearly wrong:-(

The new air force 1 will be the property of the US government. I think it unlikely it will be in service for 47, but more likely in time for whoever is 48.
Alan

The new air force 1 will be the property of the US government. I think it unlikely it will be in service for 47, but more likely in time for whoever is 48.

But it's supposed to be transferred to Trump's library at the end of his term. Unless that is deemed to be illegal by someone other than Bondi.

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