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To simplify a bit further, the core of the issue seems to be that buying lots of foreign goods with currency means a large amount of that currency ends up in fo

To simplify a bit further, the core of the issue seems to be that buying lots of foreign goods with currency means a large amount of that currency ends up in foreign hands. Either this money is eventually used to buy stuff or it is invested. The latter is what leads to a trade deficit. Not sure if it is the only way? Put that way it seems dubious if making trade more expensive would actually change things much. Anyone owning dollars still has the same choice between buying goods or investing.

skybrian 2y ago
These foreign investments are mostly not currency. When a foreign country makes a lot of investments in the US, they could be buying stocks, bonds, or making direct investments - such as building US factories, as many foreign auto makers have done. Or buying entire companies - one of the big three US auto makers (Stellantis) is now foreign-owned. Stable countries that have a lot of attractive investments will tend to have a large trade deficit, and the US is one of the more profitable places to invest. (Well, not so much at the moment.)